PARADIGM SHIFT

HOW TO CULTIVATE EQUANIMITY IN THE FACE OF MARKET UNCERTAINTY

By

YVAN BYEAJEE

Copyright © 2015
http://www.tradingcomposure.com

Includes notes and references at the end of the book.

Cover by Emily Dechant

www.emilydechant.ca
What people are saying…
"A great introduction to the awareness that is needed to become a profitable trader." ---- Dr. Van K. Tharp, Author of the
classic Trade your way to financial freedom, Founder and President of the Van Tharp Institute

"The lessons and perspectives shared -- in Paradigm Shift -- are which many could find of value." ---- Charles E. Kirk, The Kirk
report

"Trading success starts when a person is willing to look inward. In "Paradigm shift" , Yvan shares his journey of building self-
awareness and combines it with practiced trading insights. This book offers the path to "trading like a scientist" while
maintaining the calm and focus of the "Zen Master." ---- Steve "SLIM" Miller, Analyst, Hedge Fund Manager, Speaker, Host
of his own show on the TastyTrade Network

"The most important mental skills associated with successful trading can be grouped in two arenas - intuiting markets and
differentiating risks. Both of these are ironically a qualitative subjective task and therefore rely heavily on self-awareness. It
follows then that anything that increases one's self-awareness can also make one a better trader. Yvan's book is a welcome
contribution to this growing realization that quantitative understandings alone are insufficient for market success." ---- Denise
Shull, Neuroeconomist, Author, Founder and President of The Rethink Group

"I have to admit this book blew me away for the remarkable manner in which it so completely, succinctly, and efficiently covers
the topic of trading psychology. Yvan Byeajee takes a complex subject and distills it down to its essence in a way that makes its
highly accessible to his readers, and then for good measure he lays out a concrete and practical action-plan that readers can
follow to address and correct their own psychological deficiencies. This is a must-read for all traders and investors." ---- Gil
Morales, Best-Selling Author, co-Managing Director and Chief Portfolio Manager of MoKa Investors, co-author and
publisher of Virtueofselfishinvesting.com and The Gilmo Report

"This book has the necessary ingredients for what makes a successful trader in trading or in life. The last chapter of our
bestselling book "How We Made 18,000% in the Stock Market" is entitled "Trading is Life; Life is Trading" which was a favorite
as it was our blueprint at that point for how to live life. "Paradigm Shift" expands that last chapter of ours into a step-by-step
guide for achieving self-mastery. I couldn't recommend a better book on the parallels between successful trading and knowing
oneself." ---- Dr. Chris Kacher, Best-Selling Author, co-Managing Director and Chief Portfolio Manager of MoKa Investors,
co-author and publisher of Virtueofselfishinvesting.com
 INTRODUCTION

Equanimity is an important aspect of trading and it plays a fundamental role in trading success.
Consequently, one cannot expect to extract money out of the markets on a consistent basis if it is
missing. Given the role psychology plays in high performance endeavors, there are volumes of
books out there that explain in great detail principles and concepts that can be quite often
daunting to comprehend. The goal of this book is to sift through the noise and present to you
something that is relatable, simple to understand and easy to implement. My attempt is to convey
to you enough information to create inspiration, stimulate curiosity/ reflection, and provoke
realization that greatness is already present within you waiting to emerge.
On another note, I want to take this time to thank you for purchasing the book. I want to let you
know that my motivation as a writer isn’t monetary. I am a trader; I make my living off of
trading whenever the markets accommodate me, and this is more than enough for me. I am not
affiliated to any company or entity. My goal of writing this book is the fulfillment of a dream of
mine. What life has taught me is that, one of the secrets to living a happy and fulfilling life is
sharing. If one follows his dreams then he should have something worth sharing with others in
the form of hope, inspiration and a meaning to life. That to me is a great contribution regardless
of monetary outcomes. I have been debating whether to release this book for a mere dollar, but
after much thought I finally decided that I wanted the perception of its price to reflect the quality
of its content. Therefore, a price adjustment to reflect something that is of quality but also
affordable was due. However, I want to insist upon the fact that most of the proceeds from the
sales of this book will directly go to a charity of my choice on a yearly basis. One symbolic
dollar per book sold (on both e-book and paperback versions) is the only amount I will be
keeping to myself to justify the time and the amount of work I have put into writing this. In
essence, I am viewing this project as my small and modest contribution to this world.
In conclusion, here are my words to you: you can do whatever you set your mind to. You can do
anything your mind envisions. Just set up a process, follow your dreams and work on your
contribution to this world. In my experience, that is the most significant and fulfilling endeavor
out there.

Yvan Byeajee
 FOREWORD

It is a well-known fact that trading is an “inside job”, however it is a rather less well-known fact
that the linear mind needs to be told the same thing at least 50 times before it even begins
registering in the brain.
Even those of us who have traded for a very long time need to be reminded of the basic tenets
that create good habits and lasting trading results. The tenets of good trading consistency are
predominantly mental and only secondarily habitual.
Yvan Byeajee, like many before him, including myself; has learnt from his trading challenges
which led him to go deeper into self-exploration and the exploration of the nature of lasting
success. What’s more, he walks his path as I know from my conversations with him and that
alone makes this book special. There are many out there who know the theory. Turning the
theory from an intellectual understanding into reality in your daily trading life is quite something
else.
The wisdom traditions teach that there is nothing new in the world, and indeed there is not, if
only because the concept of time as we experience it as human beings does not exist. Rather it is
all about where we focus our attention in the field of infinite possibilities which already exist as
un-manifest potential.
Understanding the importance of expanding one’s conscious awareness is a feature of this book.
Trading is a business, like any other, all said and done: The success of your trading business
success depends on your ability to grow and expand.
Learning to focus on the right things in a constructive and positive manner is vital for trading.
Trading is rather unforgiving of our mental frailties. The markets have no degree in psychology;
rather they reflect your psychology and that of the rest of the sum total of traders in the market. If
you think the market owes you something, because you believe life owes you something you will
be taught a harsh lesson, as the results are immediate. Your report card is presented to you after
every trade and at the end of every trading day.
You have to divorce your emotions from this fact and also your actions, while learning two
seemingly contradicting things: Namely that each trade has no bearing on the next one and your
emotions are a valid feedback mechanism.
Your ability to learn from your mistakes, instead of viewing them with critical judgement, is also
elementary. All the above make trading, I re-quote from one of Yvan’s quotes: “Trading one of
the hardest easy money you will ever make.”
Yvan Byeajee provides the reader with a blueprint for correct thinking which will have to lead
you to correct acting over time. It is all about progressing in the right order of things. Unless you
know what the true cause of your trading challenges is, you will be wasting much time and
energy fixing the effect, while the cause continues to run, hampering your attempts at success,
just like a wound that is festering underneath the band aid.
The principles explained in “Paradigm Shift” are not unique to trading, but also apply to life in
general.
Yvan provides many examples from different areas of life to help your mind integrate the
material. Once the linear mind has accepted a new concept you will start embracing it with your
entire body. Trading isn’t hard, the hard bit is getting to the point where you will have created
lasting changes in your brain and that means creating new neural pathways. That is when things
begin to noticeably change.
Yvan gives practical advice on how to hone conscious awareness and reminds us of some very
basic, but often overlooked practices, like getting enough sleep and regular exercise to help us
think with more clarity and focus.
Less is often more. Simplicity resides underneath all complexity if we allow our egos to take a
back seat and start looking at the fabric of universal creation. The busy conditioned mind and the
need to be seen to be doing the “right” things all the time prevent this from happening, causing
much unnecessary pain and suffering.
Connecting with one’s inner centre is the key that unlocks all kinds of success.
From that place you will be able to observe that the world appears to you how you are. In other
words, it is just a reflection of your inner state. Tes, that is true for the markets too.
Meditation is one practice which is foundational in my opinion to give you access to expanded
consciousness, greater sensitivity and an overall much richer (trading) life experience.
This book will give you many easy to follow hints and practices that will help you to re-connect
with your inner core and remain in your centre, if you follow the advice and keep practicing.
If by reading this book you are motivated to start a daily meditation practice, that alone will
enrich your (trading) life.
Wishing you all well on your journey to lasting trading success and a better life and may this
book assist you on the path to finding equanimity and peace in yourself and in your relationship
to the world at large.

Mercedes Oestermann van Essen

Author, trader, trading coach www.TheBuddhistTrader.com
 TABLE OF CONTENTS

Foreword
Table of Contents
Important notes about the book
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Synthesis
Notes and references
About the author
Acknowledgements
 IMPORTANT NOTES ABOUT THE BOOK

• Nowadays, thanks to online self-publishing authors are given the opportunity to present
information with more freedom in terms of contents, size and format. With no such restrictions,
there is no use for unnecessary space fill –ins, storytelling, out of context information or mere
platitudes. My attempt is to convey simple, concrete, and straight to the point information on
what you need to know to make your learning curve as smooth as possible. That being said,
throughout the book I may tend to repeat main points, not to make the book appear bigger but
simply because some things are important and repetition will make them stick. I firmly believe
that if you apply unequivocally the ideas presented in this book you will be light-years ahead in
your trading journey. This will give you a better chance at achieving success in an endeavor
where most will fail.
• My desire to understand the causes of my unsuccessful trading patterns led me to
deeply question myself and my relationship with the markets. Throughout the book I will tend to
use my own experience as example, not in a solipsistic or self-indulging way but merely for the
purpose of better elaborating on matters which I deem necessary. I think it can create a better
relatable experience for you – the reader.
• This book was not meant to be read straight through as if reading a novel. Instead, I
suggest reading it slowly while taking time to reflect on it. Keeping a journal handy and taking
notes of your thoughts as you are advancing will prove to be unarguably beneficial. To help you
with this process of action and reflection, there are questions at the end of each chapter. They
provide an occasion to pause and reflect.
• Since each chapter highlights different themes in relation to achieving equanimity in
your trading, these can be read individually, but it will be much more rewarding to read the
chapters in succession.
• In addition to reading this book, I want you to understand and know that I am
encouraging you to make your own research on your side. This is your personal journey to
equanimity, so take the freedom to filter and take whatever you might deem important out of this
book and create the blueprint to your own success in your trading. Everyone’s journey will be a
bit different; hence, it is essential for you to find what works for you, not what worked for Jesse,
Tom or Paul. Absorb what is useful and reject what is useless for you.
• This book is the result of my understanding of the root cause of unsuccessful trading.
Therefore, you will get the most out of it if you do not attempt to compare what you may read in
here to others’ work – this can only cause confusion. The nature of our consciousness and
experiences is inextricably subjective; but, the human mind always wants to compare, categorize
and weight. Don't get attached to anything you might read in here for the information conveyed
are only guidelines that will hopefully help you turn your attention inwards.

• In the book, I will refer to the Buddha’s teachings to elaborate on meditation or other
aspects of this whole trading journey. Please understand that I am not asking you to reconsider
your own religious beliefs – if any. This book is not about religion, it’s about trading. The reason
I refer to the Buddha’s teachings is because through his contemplative practice, this man has
deciphered and diagnosed the human condition about 2,600 years ago. This diagnosis is still very
valid up to this day – I especially see its relevance in the markets. We don’t have to become
Muslims to study algebra, do we? Even though Muslims invented algebra, it is a secular field in
its own right. Similarly, when we study physics, do we refer to it as Christian physics? No. Even
though Christians invented physics, we merely refer to it as physics. A contemplative practice
like meditation doesn’t require us to get interested in – or espouse – Buddhism, or any other
eastern religions.
• This book was written with an assumption that you already have a proven edge in the
markets. However, if you don’t have one then you might be interested in checking my next book
called, Around the world: How I travel the world day-trading the spy for quick cash, due for
early 2016.
CHAPTER 1
THE START
“If you wish to know the road, inquire of those who have travelled it” Japanese proverb
The ability to manage emotions and remain calm under pressure has a direct link to
1
performance . I wish I was aware of that when I first decided to become a professional trader.
Things would have been much easier. However, things don’t always happen the way we would
have wanted them to. My interest for the financial markets started when I was in my teenage
years. I remember my older brother showing me a financial website and eagerly saying “people
actually make a living buying and selling stocks on a regular basis, you know”. Naturally, I was
struck with curiosity so I started researching more on the subject; though, I can’t say that that
research was fructuous. Those were the early days of the internet, and trading-related information
wasn’t readily accessible within the click of a mouse, nor was it as inexpensive or free as it is
nowadays. Yet, I did find enough information to spark my interest even more, firmly planting the
trading/ investing seed inside my head. I remember being so fascinated, from such a young age,
by compound return tables, quotes, and market related news. At that time, making money in the
markets surely seemed easy – just like a low hanging fruit waiting to be plucked. So I thought!
A couple of years later, I had saved a rather significant amount of money from various jobs I
took throughout the years, and I went on to invest it all with a buy and hold approach. Despite
the favorable market conditions during that period, this approach didn’t fare so well for me. This
led me to the conclusion that the buy and hold approach doesn’t work. Since this strategy never
addresses the real issues for winning in the markets – such as buying how much of what? At
what price? Holding for how long? Do you ever sell? How and when? How do you make money
in a bear market? – by definition, it doesn’t fit into a positive expectancy mold. Unfortunately,
by the time I realized this I had already lost a good portion of my investment capital. However, I
had amassed enough knowledge in the field to slowly transition to trading on a shorter time
frame, which I thought was better suited to my personality and overall aspirations. This shift in
time frame and underlying methodology has also helped me better define my edge in the
markets, and allowed me to create a significant number of trade occurrences. More on this later.
I wish I could tell you that the transition happened smoothly but this would be far from the truth.
Before I was able to acquire consistent results in the markets as a short-term trader I went
through significant drawdowns in capital – both monetary and emotional. From trading with
“scared money”, to betting it all on one trade, to changing methodologies like one changes
underwear, I made all the mistakes you could imagine. Those difficult but highly instructive
times eventually made me realize that success in the markets is 50% psychology, 30% money
management and a mere 20% system. Of course, those numbers are subjective. Some people like
to view these three components as equal. Some like to give greater importance to risk and money
management. But personally I really think that psychology is the determining factor and deserves
top attention. Without the right psychology even the most robust system is doomed to failure.
Similarly, risk and money management will only assure “death by a thousand paper cuts”,
supposing we can get to the point where we can efficiently manage risk in the first place.
Regardless of the kind of positive expectancy our system displays, if we are unable to follow our
rules and execute our trades properly with minimal trading errors we will surely find trading to
be an exasperating endeavor.
The right psychology also encompasses the appropriate work ethics. Trading – or should I say
successful trading – requires a lot of work, dedication and sacrifice. Honestly, I must admit that I
am happy that things are that way. If things were easier everyone – neighbors, uncles,
grandmothers – would be successful traders and make a boatload of money. There would be no
challenge, no fulfillment, and no desire to achieve. In other words, the world would be a very
boring place to live in. Conquering difficulty has the potential to give us an immense feeling of
satisfaction. When something is difficult, overcoming it feels like a real triumph and this creates
an amazing experience. A positive feedback loop when activated generally begets more success.
This is because though the challenges may seem impossible at first glance, with repetition we
will begin to see patterns arise in the chaos, and we will find that things aren't so difficult after all
if we take the time to analyze the problem at hand. So what is left to do in terms of an attitude to
adopt is to adapt. All the successful traders and great achievers out there have done it at one
point. Successful trading can only happen when you have sorted out the resistances that are
preventing you from making the kind of money you aspire to on a consistent basis.
Paradoxically, when you have sorted out these resistances you become someone else. If you
came in solely for the money at first, you might find out that this isn’t the unique motivator
anymore; the game and the challenges it represents is what keeps you in. If you reach this point –
and I am hopeful that you do – money will automatically manifest itself to you. Dropping our
obsession for money somehow gives us more of it. I will address this point later on as well.
I don’t have any credentials in psychology; however, just like many others before me I learned
most of what I discuss in this book through repeated mistakes, painful losses, and failures. We
evolve in a world where we are led to believe that the mental environment is a perplexing and
peculiar place that can only be understood by experts (psychologists). As a result, most people
end up living their lives in a way that lacks any conspicuous understanding as to the relationship
between their mind and the outer physical world. This lack of understanding ultimately shapes
the way they experience their lives. We don’t need a PhD to understand the nature of our own
mind. We just have to make ourselves available to learning more about the nature of our
dissatisfactions – and few people are truly willing to do that. They would rather attempt to
change the outer physical world in order to fit what is inside of them and quite often this will
turn out to be a futile endeavor, especially in the markets. It was only when I started to deeply
question myself that I began to see dramatic shifts in the way I perceived the market, but also in
the way I perceived myself and life in general. This is so because questions asked the right way
usually point to their own answers. If one does not ask the right questions, he cannot expect to
get the right answers. Markets don’t hurt us. It is our own set of beliefs that conditions us to
suffer whenever the markets don’t oblige us by fulfilling our needs. It is our beliefs that cause us
to overthink when a trade has to be entered or exited. They also cause us to doubt ourselves and
our ability to trade successfully. Eager to deepen my understanding of myself and how I
essentially created my own pain and suffering in trading (but also in my personal life), I began
spending a lot of time meditating. I also attended numerous meditation retreats where I had some
humble encounters with my own mind. A spiritual practice like meditation can teach us a lot of
things about the nature of the being, and the transiency and ever-changing nature of everything
that exists – markets included. It can help us understand and accept change as an intrinsic part of
our lives; and that is precisely what it did for me. With a better understanding of the self, came a
better understanding of the markets. It all began to make sense. I was desperately trying to force
the markets to conform to whatever beliefs I had, in terms of what I thought I deserved, what I
believed I was entitled to, whatever special trading talent I thought I had, and so on. Once I
targeted those problem thoughts and beliefs – and once I worked on them – trading took a whole
new direction for me. My results finally came in line with my new expectations.
Developing equanimity was a long and tedious process for me; however, once I acquired it the
repercussions went far beyond the boundaries of the markets. My whole life was changed. It’s as
if my vision of life went from a boring 8 bit video game to a sophisticated new generation 3D
game; and there is a reason for that. Markets are not different from life itself. Comparing the two,
we can see that:
• Markets and life are both uncertain. We cannot know for sure what will happen on a period to
period basis.
• They both provide us with opportunities. We can decide to be bold and bet the farm on every
occasion, or we can be methodical and make calculated moves. Either way, if you don’t bet – if
you don’t take risks – you can’t play.
• If we are unprepared we can feel pain and suffering as a result of not being able to flow with
them or accept their reality.
• At every corner, they can teach us a lesson if we are open to it.
The comparisons can go on and on; therefore, it is not difficult to see how the skills, habits, or
even delusions you acquire in one can and will often impact how you behave in the other. That is
why developing equanimity becomes primordial because if you can effectively transform the
way you behave when faced with difficult situations in the markets, I believe you can definitely
affect the way you behave when you’re equally faced with difficult life conditions.
Equanimity is not a word that is commonly used. Its signification for me is beyond mental
calmness or composure. It is the radical non-interference with the natural flow of sensory
experiences. For example, if you are feeling emotional about something you see or hear in the
markets, you are not trying to hold onto those emotions nor are you trying to push them down.
Instead, you take an observer stance and you watch them flow; and because of their transient and
impermanent nature you watch them slowly fade away. This allows you to get a sense of
detachment or as the French say “sang froid”, so that you have no problem taking the right action
in regards to circumstances and conditions that are happening. It is the end of the ego. Lots of
different people view the end of the ego in different ways. Others don’t find any sense in such a
statement. The way I see it is that the end of the ego is just equanimity. It is the end of craving
and the end of attachment. As the Buddhists say, “Clinging on to things, ideas, opinions, objects,
people, even life itself is what creates suffering”. In trading, clinging on to an idea of what the
markets should make available for us, clinging to a loss, or even craving for a certain amount of
monetary gain is what creates suffering. This “clinging” or “attachment” springs up when we are
ignorant of the fact that everything is transient, temporary, impermanent, changing. Therefore,
freedom comes to us when we have snuffed out craving and attachment by eliminating
ignorance.
We all have experienced at some point a gap between what we realize as being possible from our
trading and what our current bottom line is. This happens because we can’t seem to restrict
ourselves from doing things that aren’t in our best interest. Most of us are stuck at this stage and
unable to figure out how to change things. Trading with equanimity is achievable by anyone, but
it requires a genuine and sincere willingness to learn how to do it. This encompasses paying
attention to ourselves and beholding the environment we evolve in for what it truly is.
Throughout the book, I will refer to my experience as a Zen practitioner in order to shed light on
the various aspects of unsuccessful trading and what I think is its antidote. My intention is not to
fill this book with mumbo jumbo new age religious ideologies – though, good trading does
require that you reconnect with your inner-self, and this is often attained through a spiritual
practice of some sort. Spirituality needs not to have religious connotations. “Spirit” comes from
the Latin word “to breathe”, and it typically involves a search for meaning in life. When you
breathe mindfully and observe your body for what it truly is and when you grasp the intricacy,
beauty and subtlety of life, then that soaring feeling, that sense of elation and humility combined,
is surely spiritual. I only aspire to help you realize your potential, not only as a trader but also as
an individual. I will give you a very detailed and comprehensive blue-print on how to develop
equanimity. I will show you how to bring more consistency into your trading and into your life.
While I cannot promise you that you will make money, I guarantee you that you will become a
better trader and overall a better “you” if you understand and follow the principles I discuss
about.
UNCONSCIOUS INCOMPETENCE
“The greatest enemy of knowledge is not ignorance; it is the illusion of knowledge.” Daniel J. Boorstin

Anyone who starts down the road to becoming a trader wants to reach consistency in their results
as fast as possible but few eventually make it there. In fact, several studies2 suggest that most
retail traders are worse off financially after the first couple of years in the financial markets than
before they started trading – i.e., if they make it through those early years without going broke in
the first place. This is a staggering truth and one that is echoed around most of the financial
markets of the world. Naturally, this begs the question: why do so many people fail in the
markets?

Retail traders are by the very definition self-employed. To succeed as a self-employed trader you
need two very distinct skill-sets: first as a self-employed business owner, and second as a
professional trader. Both skills work in unison, one cannot be without the other. Therefore, there
is no question that for some, trading might not be a good fit at all because it requires a lot of
work. Trading is a real business, though few actually treat it as such. As a matter of fact, any
activity engaged on a regular basis with the intent of making money is a business. Approaching
our trading operations from a business standpoint means that:
1. We have to develop a concept or an idea which aims to satisfy a market inefficiency, diversify
risk and make money work for us.
2. We have to test that idea and see how it performs over time.
3. We have to hold an inventory. This is our current positions. We have to buy them for less than
what we intend to sell them for.
4. We have to manage our employees. Our current positions can also be seen as our employees.
We have to keep the ones that are working well, and fire the ones that aren’t.
5. We have to take insurance. Our business must have insurance to manage risk because losses
will occur. It is not a matter of “if”; it is a matter of “when”. Therefore, stop-losses, hedges and
position sizing are our insurance against big losses in our trading business.
6. We have to use a strategic deployment of capital. We attempt to buy things at a lower price
than what we intend to sell them at. We also try to diversify what we buy so that our risks are
uncorrelated and dispersed.
7. We have to conduct our business where there are ample buyers and sellers so that we don’t get
stuck with positions (inventories) that no one wants.
8. We have to actively preserve our capital. If we lose that we are out of business. Therefore, we
have to make sure that we do not go “all in” on any perceived opportunity.
9. We have to work towards the expansion of our business. This can only happen after it
becomes profitable. For a trading business, this translates into trading more vehicles, perhaps
trying a new strategy, and/ or adding more trading capital to our accounts so that we can increase
the size of our trades.
All these steps have to be figured out on paper prior to starting to trade through a process called
trading plan development. Engaging with the markets with an abstract idea or vague concept of
what we should be doing doesn’t work; therefore, it is essential that we develop a trading plan.
We all want security, a reliable source of income and wealth generation, but how can one expect
consistent results from any business that never got properly organized in the first place? This is
the primary reason why venture capitalists will not even listen to the best of business ideas if the
person presenting them doesn’t have a well-defined business plan. The underlying assumption is
that if you can’t build it on paper, how do you expect to build it in the real world? For this same
reason the trading plan is an absolute must for any aspiring trader. Besides serving you as a
support to describe the inner workings of your business, the trading plan is another way of
acknowledging the fact that you can’t predict the future. Correspondingly, it is there to help you
take a structured approach to the markets’ uncertainty. Your trading process is not an abstract
idea anymore – it becomes well structured. Your rules and processes are clear on paper, all you
have to do is execute.
Setting up a business is one thing, and it can be considered as the easy part. But being mentally
prepared to make the business consistently profitable is another thing. While this might be a
shocker for a lot of people it is without a doubt the most challenging aspect of this whole
endeavor. For example, a novice trader may have devised a trading plan and figured out her
trading methodology; however, there might still be a negative correlation between what she ends
up with and what she could have had. In other words, she isn’t using her methodology to its full
potential. Just as buying a car won’t give us the ability to actually drive it, novice traders
erroneously believe that with the buying or the creation of their own methodology comes the
intrinsic skills to actually trade it flawlessly. They do not think that just like with anything they
need a particular set of skills in order to exploit their methodology to its full potential. We cannot
take for granted that because we recognize an opportunity to enrich ourselves in some way or
another that we will have the skills to be able to take advantage of that opportunity appropriately.
But that is exactly what most of us assume at first when we start out. We want to be able to
produce an income or a return from our trading that we can rely on, but this is not such an easy
task as one might be inclined to think. Consistent returns in trading are a result of the consistency
in our behavior.
The general public is attracted to the markets because it seems like an easy way to make a lot of
money. This leads us to the following paradox: Suppose a layperson decides to become a
surgeon. He goes into a bookstore, heads straight to the medical book section, and finds a book
entitled “How to perform heart surgery.” After spending a couple of days studying it do you
think he would be ready to perform heart surgery? The bare thought of him doing this is
preposterous, right? Now, suppose that same person decides to go in the finance book section of
the store instead, and buys a book called “How to beat the market in 7 days.” After spending a
week-end reading it suppose he opens up a brokerage account the following week, and starts
trading with the belief that he can beat the markets on a consistent basis. Do you still think this is
utterly ridiculous? It takes years to build a successful trading career; still most people won’t see
anything odd about that second option. Trading is probably the world’s only profession where a
complete amateur – a person who knows absolutely nothing – has a 50 percent chance of being
right in the beginning. I haven’t seen this phenomenon in any other profession. In trading there
are only two things we can do, either we buy or we sell. Naturally, some people are just going to
get it right by pure luck at least a few times in the beginning. This deceives them into believing
that they possess the appropriate skills to trade efficiently. It makes them believe that they have
some kind of special talent to predict market directions, or that trading is a lot easier than what it
seems. However, the reality is that winning in the markets requires absolutely no skills at all.
Additionally, we don’t have to have a good reason – or any reason at all – to put our cursor on
the buy or sell button; but, doing so, we could immediately find ourselves in a huge winning
trade. Therefore, the natural tendency is to think that if it is this easy to win, it can’t be that much
harder to make a steady income. The truth is that winning and being a consistent winner are two
completely different things, and this can be a really hard mental barrier to break for most.
What novice traders don’t understand is that good trading requires a particular set of mental
skills that need to be developed. Since those skills are counter-intuitive in nature and tend to go
against normal human tendencies, they will have to be developed and built over years of practice
and engagement in the markets. What may be expected from such refinement of mental skills if
practiced, developed, often repeated, and well-perfected is mastery over the self and its various
conditions – i.e., anxiety, fear, greed, craving, and so on. You are not overcome by these states
but you subdue them as they arise. Therefore, when we first start out we should keep in mind the
possibilities online trading has to offer, not only in terms of monetary gains but also in terms of
personal development. New traders focus too much on the potential monetary rewards and this is
what messes up their results because their expectations are not in line with the way markets are.
We shouldn’t expect to instantly make a comfortable living at home, in our pajamas. We
shouldn’t expect to be millionaires by the end of the year. While these scenarios are definitely a
possibility, they are highly unlikely to happen right from the get-go. Yet, we can improve our
chances of those happening at some later point throughout our trading career by taking the time
to prepare now. ‘Skills over money’ should be the beginner’s motto. If you keep an open mind
filled with childlike curiosity, and if you cultivate an eagerness to learn and build your skills
instead of putting your attention right away on the monetary rewards, you will be far ahead of the
crowd.
People often fail to acknowledge or realize the financial, emotional and time commitments that
are required to build a successful trading career. As we start out in this journey, our goal should
be focused on adopting a business approach so that we can bring a little more formality and
structure to our entire trading operation. We should also acknowledge our current lack of skills to
trade the markets effectively. By acknowledging this, we open ourselves to accept new pertinent
information to help us grow. Lastly, when we first start we should focus on building mental skills
conducive to good trading instead of thinking about the money. When our roles and goals, as
traders and business owners, are clearly defined we can focus on the pure execution of our
trading model. However, if we don’t clearly define our roles and goals, then we will have a
tendency to act in a way that lacks any kind of structure. This lack of structure is the reason why
most retail traders set themselves up for failure right from the start.
CONSCIOUS INCOMPETENCE
“Trading is the hardest easy money you’ll ever make” Common Wall Street adage

When one starts to develop awareness about his incompetence (usually through significant
losses) and realizes that there is more work involved in trading than what he originally
envisioned, he usually starts to work on finding some kind of Holy Grail trading system. This
stage can linger for years, but sooner or later there comes a point where the individual realizes (if
he hasn’t given up yet) that there isn’t such a thing as an infallible and ever-winning trading
system. The true key to success is a profound understanding of market structure and how his
psychology relates to this whole process.When this shift of perception – or paradigm – happens,
it creates an avalanche of conflicting feelings for the trader. He knows the potential is there to
enrich himself beyond his wildest dreams; the markets provide us that opportunity at every
moment. The trader can clearly see his success right before his eyes; however, something within
him seems to disrupt his ability to grab it.
The market represents a challenge and for many traders the challenge or battle is also occurring
within as thoughts and beliefs combine with unacknowledged and unmanaged emotions that
drive behavior. This results in traders not being able to act in their own best interest. As
“conscious incompetents”, they realize that they are not as “expert” as perhaps they thought they
were when they first start out. The transition to this state from being unconsciously incompetent
can be shocking, especially if it happens abruptly through severe and significant losses. Such
sudden realization – for example when you meet others who are clearly more competent than
you, or when someone holds up a metaphorical mirror to your real ability – can be painful. This
is a very difficult stage to be in because it is where the most judgments and doubts against the
self are formed. This is also where most people give up. They assume that trading simply
requires a special talent that they were unfortunately not born with. However, it is the stage
where real learning and change begin for those who are persistent.
There is nothing esoteric or even illusory about trading success. Of course, those who have
staying power are the ones who get to experience it, but there is nothing extraordinary about this.
It is achievable by anyone. To my knowledge, no one is born with any special trading talent or an
uncanny ability to predict the markets. There might be a predisposition for better self-control and
better adaptability, but that is it. This is nothing that us others can’t improve upon. When we
think of it, good trading is a function of three things:
-- How much engagement you have in the markets
-- How adaptable you are
-- How much self-control you display
Those three points work together and they are all sine qua non. You have to be able to be (and
stay) engaged in the markets so that you can acquire the appropriate knowledge and skills to help
you navigate them. Also, you have to be highly adaptable. This means that you have to accept
changes in the markets, learn from the mistakes that you will undoubtedly make, and embrace
the failures that you will certainly experience. You have to exert control over your impulses so
that you don’t get into low probability trades; bet the farm on any single trade; or let small losers
grow into something so massive that they endanger your whole account. The degree to which
you fail to develop or work on these three points is the degree to which your progress will
stagnate. You will experience self-sabotage which is almost always the consequence of your
beliefs whether you are aware of it or not.
I know there are some complex books out there that have been written on the subject of trading
psychology – in multiple volumes sometimes – however it doesn’t have to be that complicated.
It is not rocket science that is required here. You don’t even have to go deep into your past and
decipher every single belief you acquired since your childhood causing you to shoot yourself in
the foot every time you trade. You could, but you don’t have to. All that is required is a clear
understanding of what you need to change, how you need to proceed to facilitate those changes,
and then fabricate the proper plan to help you get there. Subsequently, you have to apply the plan
diligently until trading consistency becomes an intricate part of who you are. This is the hardest
part and one which very few are able to do. It is not easy to face our demons and put a stop to
some deeply ingrained behaviors. However, I wrote this book with the assumption that you
desire your trading success strong enough that you are willing to “erase” all conflicting beliefs
that stands between you and your goal.
When you break it down to the most fundamental level, changing your trading results, your
behavior, your life is the only logical result of desire. If you truly desire something, you’ll find
ways to make and facilitate the change, whatever that might be. One thing I want to point out
though is that desire is not to be confused with craving. I strongly believe there is a clear
distinction between the two. Desire is an expression of longing. The pursuit of that which we
desire gives meaning to our lives. Craving is an expression of neediness. When we are on
autopilot – and thus incognizant – , we tend to crave things. When we remain centered in our
awareness and consciousness, we can desire things and align our actions with our intentions so
that both are in harmony. Awareness allows us to identify what is truly important to us. Desire
leads us forward. Craving, on the other hand, is the attachment to desire and it is a poison that
will consume you. It will cause you to pin your happiness to the very thing you desire such that,
you will melt into grief if you don’t get what you want. Furthermore, it will impede on your
ability to take rational decisions. For example, in trading, it will cause you to take decisions
based on your beliefs about being wrong, money, your self-worth and myriads of other beliefs.
To adapt to the constant changes that is intrinsic to the markets implies that we are changing
ourselves as we make ourselves available to learn more about it. Therefore, to eliminate craving
you have to eliminate ignorance. If you want to acquire consistent results this should be an
obvious step to take. Keep the flame of curiosity and wonderment alive. That is the well from
which we traders draw our nourishment and energy.
It doesn’t matter if you own a clothing store, a fast-food outlet or even an online marketing
business, if you want consistent results you have to be consistent in what you do. This is even
more essential in a trading business because of the obvious need for quick actions in the midst of
real-time moving markets and the emotional ramifications that ensues. With no structure to the
way you approach the markets you will have a tendency to act impulsively. If you can make it a
priority to stay methodical and systematic you won’t be subject to such wild emotional swings
that will detract your trading results.

QUESTIONS

Think of a challenge that you successfully took on. What did you learn, and in what ways? Did
you grow from the experience?
What makes you think you have what it takes to succeed in trading?
Are there particular areas in your life where you tend to think you know it all? In other words,
are there areas in which you are closed to change?
CHAPTER 2
THE NATURE OF TRADING
“When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have
the same significance. As a result, your expectations will be in harmony with the possibilities.” Mark Douglas
At its most basic level , short-term trading involves the frequent buying and selling of
stock, commodities, currency pairs or other instruments, with the goal of generating returns that
outperform buy-and-hold investing. Since the timeframe is short – positions can be held from a
few minutes to a few weeks – an approach using strictly fundamental analysis would prove
useless and unprofitable. Fundamental analysis involves analyzing the financial statements and
health of a company, its management and competitive advantages, its competitors and markets.
When used on a short-term basis it creates a disparity between “what should happen” and “what
is happening.” This disparity makes it extremely difficult to make anything but very long-term
predictions that can be hard to exploit, even if they are correct. Technical and quantitative
approaches on the other hand are more adequate for trading because they can identify frequent
high probability opportunities based on statistical studies of price action, volume, option pricing,
and so on. However, using such approaches successfully in the markets require that you embrace
the following:
1. You must adopt probabilistic thinking
2. You must develop the emotional fortitude to stick to your system (assuming you have a
system that has been back-tested and proven to make money in the first place)
3. You must keep a constant level of engagement in the markets.
Before I expand on those three concepts, keep in mind that I am referring to a technical
methodology that is systematic in nature. Technical analysis is, for the most part, an art;
therefore, subjective and discretionary. However, some aspects of it can be turned into a fully
quantified and statistically backed system. A quantitative methodology on the other hand is not
necessarily technical in nature. Some fully quantitative methodologies could care less about what
the charts are saying and be completely based on the statistical studies of Implied Volatility. As
you acquire knowledge and insight about the inner-working of both quantified technical and
quantitative approaches – as you expand your perception of information available – you will gain
a deeper level of understanding of the cause-and-effect of your trading results. The deeper the
level of your understanding and insight, the more effectively you can interact with the markets to
fulfill your desire and achieve your goals.

Adopting probabilistic thinking

A trading edge merely puts on your side the odds of one thing happening over another based on
what price did in the past when similar conditions occurred. That is what technical or
quantitative trading systems were ever designed to do. Chart 1 represents a quantified technical
trading strategy based on price action of the Russell 2000 Ishares ETF (Ticker Symbol: IWM). It
uses a combination of the 50 and the 100 Exponential Moving Average to identify price trending
conditions. Please keep in mind that this system is rudimentary and is only used to illustrate a
point. It is a buy only system where an entry signal occurs when price action comes in between
the 50 and the 100 Exponential Moving Average and when we get a close above the previous
day’s high. A stop-loss would then be placed right under the 100 Exponential Moving Average.
As can be seen, trading using this system would have resulted in 5 wins and 1 loss from mid-
April 2014 to mid-February 2015. This is because, even though there was an edge – and the edge
in this system identified pullbacks within a larger uptrend-, outcomes generated by any technical
or quantitative method are random on a trade by trade basis. Put in a different way, there is no
way to know in advance what the outcome to any particular signal will be, or what the sequence
of wins and losses will be on any particular trades. In this example, even if everything was
aligned perfectly at F – price being between the 50 and 100 Exponential Moving Average, plus
we got a close above the previous day’s high – the trade still ended up being a loser. What is not
shown on the chart is that the uptrend resumed itself rightafter that deeper pullback – price went
to new highs. So when putting on the trades, we didn’t know which one would end up being
winners or losers. The only thing we knew of is that we had a higher chance of things working in
our favor.

I know it is somewhat of a paradox to think that events that have random outcomes can produce
consistent results. This might even seem as an odd concept for a lot of people, but this is the
principle that has been used by casinos for hundreds of years. Technical and quantitative
methods will give the individual trader the same kind of advantage the casino has over the
individual player if the trader can think about it from a proper perspective. Trading errors are the
results of us believing in some way or another that our technical methods are telling us what the
markets are going to do next on a trade-by-trade basis. The truth is that technical and quantitative
methods aren’t designed to do that. They are there to put the odds of success in our favor over a
series of trades based on what happened in the past when similar conditions occurred. There is
no certainty. It may not seem like it on the surface but there are some very deep psychological
implications attached to this randomness principle. Once a trader understands that the markets
can hand him a string of losing trades without necessarily negating the efficiency of his edge, he
will be one step closer to consistency. On the other hand if the trader hasn’t learned to accept
each outcome as being random, he will indubitably find that trading can be one of the most
frustrating if not exasperating endeavor he's ever chosen to undertake. The reason is that he will
always be expecting the kind of certainty from his methodology or from the markets that none of
them will ever be able to offer. Technical and quantitative methods are supposed to define and
identify a statistical edge in the markets. The edge can repeat itself over and over again with
some definite degrees of consistency; however, the hidden problem or disadvantage in this
apparently ideal situation is that the outcome doesn’t always correspond with the edge on a
trade-by-trade basis. Our mind can’t understand that until we train it to do so.
Intrinsically, our mind has this natural tendency to make associations all the time. It just
naturally thinks that if we have an edge or a pattern that is consistent, then we should have an
outcome that is consistent with that occurrence. The truth is that there doesn’t have to be a
relationship between the outcome and the occurrence. For example, if our last trade was a
winner, there is no guarantee that the next one is going to be a winner as well, even if the pattern
or technical signal is exactly the same. Conversely, the previous trade could have been a loser
but this doesn’t mean that the next trade is going to be a loser as well. This is a difficult, yet, very
important concept to grasp. Even though the same specific criterion is used to identify a price
pattern, the outcomes to each signal have no relationship to one another. In other words, there’s a
random distribution between wins and losses over any sequence of trades you might look at, and
depending on the kind of positive expectancy your model enjoys, losers and winners can come in
strings. The traders who have grasped this reality and have learned to think in probabilities are
the ones who don’t experience the same kind of emotional traumas that the typical novice traders
experience, because they have stopped expecting from the markets what they simply cannot
offer.
We have to shift our paradigm and understand that we are essentially running our own little
casino. When we do so, we will then be able to take full advantage of whatever opportunity we
may perceive in the markets without vacillating or overthinking. We will understand that there's
no reason to do that. If you find yourself overthinking, stressing, or praying, what is implied is
that you are having trouble accepting the fact that you have no control over the market's
behavior. Embrace the uncertainty and you will experience a completely different state of mind.

Developing emotional fortitude

First and foremost, we don’t want to get into trading with a possibility of being disappointed.
When that potential exists it has the effect of altering the way we perceive market information.
As an example, imagine that I have a directional assumption for a trade. I did my due diligence
prior to entering that trade and I got into it thinking that I was going to be right. As the markets
are moving against me, I am going to have a tendency to focus on information that is telling me
that I am right. I will have a tendency to ignore the information that is telling me that the markets
are actually trending against me. In other words, if the markets are moving against me, every
green bars or red bars (depending on if I am long or short) will have the effect of causing me to
feel good and optimistic even if those bars are just small retracements in a larger trend. By
focusing on information that is telling me that I am right, I am being oblivious to the fact that the
markets are trending against me. Therefore, I will not be able to take advantage of whatever
opportunity the markets are giving me in that moment - that is, in the direction of that larger
trend. I will only be able to identify the trend in hindsight, way after the facts, all because I am
putting an extraordinary amount of significance on the information that is telling me that I am
right, and ignoring the information that is telling me that I am wrong. Conversely, if I were to be
in a winning position, the same process is going to happen. I will have the tendency to focus on
any market information that is telling me that I am wrong; therefore, I will cut my winners short
because any minor retracement will scare me out.
If a trader doesn’t develop the emotional fortitude to stick to his convictions he will always be
susceptible to being disappointed. If he doesn’t align his expectations with the reality of the
markets, he is going to have this tendency to distort market information. This will cause him to
hang on to his losers, or exit his winners prematurely. However, if he changes his perspective
and thinks of trading outcomes as being random in nature, he will be able to change his
expectations in regards to any individual trades he places. Do we have the same kind of
emotional response when we are predicting the flip of a coin? No, because we are operating out
of a completely different belief. The belief is that the outcome of a coin toss is random, therefore,
all we are doing is guessing. In trading, because we do analysis and our intellect is involved in
this process, we have associated trading to an endeavor where we have to be right. Take trading
out of a right or wrong context, put it in a random category in terms of outcome and you will get
the same emotional responses you get with the flip of a coin: you won’t care! Change your
expectations and your state of mind will change.
Another interesting comparison is that of the scratch card. Buying a scratch card is a way of
saying that we have accepted the risk of losing the money we have invested in it. We can’t
scratch anything until we have accepted the risk. If we didn’t accept the risk we wouldn’t have
been able to take money out of our pocket and buy the card. Acceptance is being at peace with –
or being in complete harmony with – the fact that we may lose. In essence, it’s the money we are
willing to lose to know if we are going to win a prize or not. Once the card is bought, we have no
other choice but to scratch to see if the pattern shows up before taking any other actions. If the
pattern on the card is a jackpot, great! If not, then we might buy another one to find out if it is.
When trading both technical and quantitative methodologies, that pattern shows up first, after
which we have to put an amount of money we have decided to risk to find out if it is going to
work or not. Naturally the problem here is that after the pattern has presented itself we also have
the ability to retract ourselves. Furthermore, the average trader will often overthink and build a
case for that pattern being right. Then, he will seemingly define a risk level – which of course he
hasn’t accepted, and he will enter the trade. When he is proven wrong, he will end up removing
his stop-loss instead of sticking to his original plan. In doing so, he will let what could have been
a small losing trade turn into a big losing trade. This ability to change things right in the middle
of a trade is what messes up with our expectations. In this particular instance, the trader hasn’t
truly accepted the risk to begin with. Placing the trade and removing the stop-loss later on was
clearly an expression of agreement that was not supported by real conviction. He didn’t accept
the risk, more so he didn’t want to be wrong. But as we saw earlier trading a technical or
quantitative methodology has nothing to do with being right or wrong, it’s just an odds game. It’s
only when we embrace this truth and when we manage our expectations that we will be able to
utilize our methodology to its fullest.
The only expectation we can have when entering a trade is to think that the market will do
something. What? Nobody knows. We don’t have to know. The only thing we need to know is
this:
1. Do we have an edge?
2. How much our maximum potential risk is?
3. How are we going to take our profits?
At any given time, if any one of these parameters is missing, then the trade is not worth entering.
We have to free our mind from any attachment or expectations if we want to utilize our
respective methodologies to their full potential. This will allow us to extract the maximum
amount of profits that they – our methodologies – can make available to us based on the kind of
patterns they identify and their frequency. Trading errors result from believing that when a
pattern is present it is going to give us a winning trade on this current trade. We cannot allow
ourselves to think that way because that is the way the typical losing traders think. They think
that they are not going to put on a trade unless they know it is going to be a winner; otherwise,
why would they put that trade on? That kind of backward thinking obviously messes up their
expectations for the trade.
The markets don’t generate happy or painful information. From their perspective all of this is
simply information. The markets are not right or wrong, nor are they out to get us and our
money. It may seem as if they are causing us to feel the way we do at certain times, but that is
not the case. It is our own mental framework that determines how we perceive the information,
how we feel, and as a result whether or not we are in the most conducive state of mind to take
advantage of whatever the markets are offering in the moment. If we have a poor understanding
of market structure, probabilities and more so of ourselves, trading can prove to be a real
conundrum. We will always internalize market action and reject the responsibility of our losses
on the markets, not to mention on others. Trading a technical and a quantitative methodology is
just a function of spotting your edge. It is a function of entering and exiting trades according to
your rules, and assessing the results over a series of trades. This is no different than a coin flip
exercise (refer to the next segment). Keeping this in mind should alleviate some of the pressure
you might feel whenever the markets are moving against you. However, if you feel you still can’t
seem to cultivate the kind of composure that is required to excel in this business, then you have
to do some work on yourself. Chapter 3 and 4 will dig deeper into that.

Keeping a constant level of engagement

In probability theory, the law of large numbers is a theorem that describes the result of
performing the same experiment over a large number of times. According to the law, the average
of the results obtained from a large number of trials should be close to the expected value, and
will tend to become closer as more trials are performed. A perfect way to illustrate this law of
large numbers is by taking the example of a coin flip. Suppose I give you a coin which is
weighted in a way that it’s going to come up heads 70% of the time. Now, I assume you would
agree that just because we know mathematically and statistically that heads has a 70% chance of
showing up over the course of several flips, we still don’t know the actual sequence of heads and
tails. What we do know is that I am going to flip the coin a hundred times and 70% of the time it
is going to come up heads. First flip might be head, second and third flips as well; but the fourth
and fifth ones might come up tails. In other words, we can have streaks of heads and tails, and
the point that I’m hopefully making clear is that there’s no way to know the actual sequence.
However, we do know that we have 70% chance if we keep the number of flips statistically
significant. The more we flip, the more likely we are to reach 70% heads as expected value.
Put into a trading context, this obligates us to stick to our methodology and trade it effectively if
we want to be able to extract consistent returns out of the markets. This implies keeping a
constant level of engagement in the markets. We have to take every signal our system gives us
and exit where it says we should, as often as it requires us to do so. Simple, right? The reality is
that most people aren’t able to embrace that simplicity. They get caught up in ‘what-if’ scenarios.
They want to wait for the perfect moment, the perfect opportunity, the perfect time. It’s a terrible
thing to wait until we are ready. We might never feel ready. I believe there is almost no such
thing as being ready. There is only now. Why not do it now? If our system is indicating an
opportunity, now is as good a time as any. Life is about taking risks. It’s ok if we lose on this
trade. We will learn from it. There is no real losing in life; there are only opportunities for
growth. Adopting a ‘just do it’ approach to trading could ultimately provide us with the
possibilities of enjoying an equity curve similar to the one represented in Figure 1. As you can
see when a profitable trading system is followed to the letter and trading errors are minimized,
our results become in line with the capabilities of the system. However, the degree to which the
system is not followed and trading errors are constantly occurring, is the degree to which we will
be skewing the numbers in a way that is not favoring a positive outcome regardless of the
capabilities of our system. This will cause our equity curve to experience deep, irregular and un-
harmonic troughs as can be seen in figure 2.

Several studies of FCM (Futures Commission Merchant) accounts have shown that the most
successful traders are those with the highest activity levels. Even the best intermediate term
investors who use trend following systems constantly massage and adjust their positions. All the
people I know who are able to support themselves by trading tend to be very active. The basis
reason behind this is that:
1. As said previously, the average of the results obtained from a large number of trials
should be close to the expected value, and will tend to become closer as more trials are
performed. In other words, the more we trade, the better should our chances be to make money
2. One cannot expect to develop mastery with merely theoretical knowledge and no (or
minimal) ‘skin in the game’. As we keep trading –and practicing – we should acquire skills and
develop domain expertise faster than others who aren’t very active
3. Taking lots of trades prevents us from getting too attached to any one of them
4. Taking lots of trades helps in minimizing the impacts of a single potential bigger loss
There is a lot of talk about over-trading and most trading books out there will argue against
trading a lot. I have no clue as to how this conventional wisdom started out in the first place, but
one thing I do know for sure is that this is a fallacy. In a quest to understand the concept of
trading a lot, we come to a point where we have to ask the question: why does everybody tell us
that this is the wrong thing to do? If our statistical chance of reaching our expected results is a
function of the number of times something happens, then why do we want to do it less? Please,
help me understand the logic behind this – if there is any! I firmly believe that over-trading can
only exist for people who trade models that either don’t work, that they don’t fully understand or
that they haven’t thoroughly researched. However, once they understand and trade a tested
methodology, they'll realize that they are severely under-trading.
There is an important caveat to this ‘trading a lot’ concept. For it to be relevant, you have to trade
small! In his interview with Jack Schwager3 Larry Benedict states the importance of grinding it
out:
“Since I started in the business, I have seen a number of traders who ended up committing suicide or being homeless. The one
trait they all shared was that they had a gambler's mentality. When they were losing, they were always looking for that one trade
that would make it all back. I learned early on that you can't do that. This is a business where you have to work. That's what I do.
Every day I make hundreds of transactions. I grind out the returns. If you look at my daily returns, you will see there are very few
big up days.”

The message is clear; we should never take on enough risk to make losing our account a feasible
outcome. If we go to a casino, they would rather have us place 100 bets for a million dollar each
than 1 bet for 100 million dollars. That is why there are table limits. Even though they have a
clear edge over the individual player, the casino would rather we take more bets because they
understand that probabilities only work when the number of occurrences are high enough to
make them statistically significant. So by accepting 100 bets for 1 million dollar each, they are
making sure that enough occurrences happen. Eventually, over a certain number of bets, the
house will swallow the entire 100 million dollars. Put in a trading context, if winning and losing
trades were evenly distributed, trade size would not be a big issue. The problem is that winning
and losing trades will often run in streaks. No trader knows how bad their worst streak will be
until it happens. Therefore, large position sizes can definitely hurt our account balance during
those streaks. Trading small enough sizes allow us to have enough occurrences to make the
probabilities work in our favor.
The purpose of learning is very important. We learn things so that we can adapt to our
environment, which is the whole purpose of our existence. It is the whole purpose of life itself,
and while other animals may find other ways to adapt, the typical way us humans do it is through
the acquirement of knowledge. However, it is not easy to open ourselves to learning new things.
Quite often, what we already know will act as a blocking mechanism to prevent us from
corrupting what we have already learned so far. The extent to which we achieve success in the
markets is a function of knowing the most appropriate set of steps to take in relationship to the
current conditions. But knowing, however noble, is not enough. We have to be able to act on
what we know. The more we allow ourselves to learn, the better we are able at making
assessments about the opportunities the markets can present to us at any given moment. The
more we open ourselves, the more we understand how to take advantage of those opportunities.
The more we practice, the more we make trading success a reality for us.
TRADE LIKE A SCIENTIST
“I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and
missed. I've failed over and over and over again in my life. And that is why I succeed.” Michael Jordan

In order to prove the viability of an edge, we must measure its capabilities before and after
improvements are implemented through an exercise called sample size determination.
Essentially, we commit ourselves to placing a certain number of trades according to what our
system indicates. We do so systematically without tweaking any of the parameters for the trades
until we are completely done with the set number of trades. Many traders and authors in the
trading literature have suggested that 30 data points is enough to properly test the significance of
a set of data – the significance of an edge. 30 data points (trades) seem a little bit meager,
especially if you are testing a quantified technical and/or quantitative methodology; therefore, it
should be viewed as the strict minimum. In general, the bigger a sample size, the more believable
a study's conclusions are.
As said at the beginning of the book, I am holding the assumption that you already have a tested
and proven methodology; therefore, what we are more concerned with here is that you acquire
the ability to execute your edge systematically. The sample size determination exercise can also
help you with that. It can teach you patience and self-control, because in the end our results are a
function of whether or not we are able to execute properly without making trading errors. If we
are able to execute properly, then our results should be in line with the capabilities of our system.
Hence, this exercise forces you to stick to your system so that you can only assess the results
after a set number of trades. A good thing to do when your edge appears in the markets is to say
to yourself, “I am committed to take the next x number of trades”. In essence, what you are
stating is that you are committed to flawlessly execute those trades until the end of the exercise.
And if need be, any modifications to your methodology, risk, or trade frequency should be made
after the exercise. You should not tweak or change anything during the exercise or else you will
be skewing the results. If you think about it that is exactly how a scientist proceeds when she
runs a science experiment. During that science experiment there are all sorts of results that could
come up. Some results might be positive while others might be negative. However, all of them
are data points. Each result is a piece of data that can ultimately lead to an answer. That is how
most vaccines were created; they were the results of trial and error. Therefore, a good scientist
doesn’t concern herself with failures, anomalies, or mistakes. She treats them as mere data points
that will eventually lead to an answer. Imagine if she took every mistake, failure, or erroneous
data within the experiment as a representation of how bad a scientist she is, it would be kind of
unfruitful, wouldn’t it?
When we first start out in our trading journey our primary goal has to be the building of new
habits and the learning of new skills conducive to successful trading. Therefore, just like the
scientist we are simply experimenting. If we run enough experiments we are going to get
negative results, even a few in a row sometimes. However, if we focus on the process of trading
correctly, then mistakes and failures are merely experiences that point the way. Every trade,
regardless of them being winners or losers, has to be treated with the same degree of importance.
Each result is a piece of data that will eventually put us on the right path. Doing this sample size
exercise appropriately and long enough is essentially an exercise of de-energizing our beliefs that
are not conducive to successful trading. It is also an exercise of acquiring confidence in our
methodology. The reason behind this is that you might be faced with results like the following:
win, loss, win, win, loss, loss, win, loss, loss, loss. On this 3rd consecutive loss your rational
mind might be screaming “I know what is going to happen here, I know the next trade will be a
loser.” What is expected of you is that you still put on the next trade. If it turns out to be a winner
this will consolidate in you the belief that winners and losers are randomly distributed; therefore,
we can’t possibly know the outcome to any given trade. So when we are able to go ahead and do
what we need to do, we are building a positive credit until there are more positives than what
was conflicting.
The sample-size exercise is an essential step in learning how to trade successfully; however it
will not be as impactful as it could be if you don’t keep proper records. When it comes to
climbing the learning curve of trading, few tools have proven as helpful to traders as journals.
Given the complexity of the market, it is impossible for most of us to recall simply from memory
how we have acted in certain situations and more importantly what we have learned. Trading
successfully, unfortunately, is not a skill that we can acquire by being passive learners: therefore,
a journal is by default an indispensable tool in learning how to use and take advantage of our past
experiences and observations. A good journal should help us monitor our thoughts and emotions.
It can be as simple or as complex as we might wish to make it, but a good rule of thumb is that
the more detailed it is the greater the opportunity to learn. From Benjamin Franklin to Richard
Branson, many of the greatest minds of this world think (or have thought) on paper. Einstein, for
example, would always carry a notebook with him and record his thoughts. The idea is to use the
journal to keep a real-time record of anything that goes through our mind – anything that might
be of interest at an ulterior time, or anything that can help us in our quest for growth and
knowledge. In trading, what we are thinking and feeling prior, during and after a trade is so
important. If we can get ourselves to record what is happening in our mind at those precise
moments, it can provide us with incredible insights into the cause of our negative behavioral
patterns that affects the way we experience the markets. The reason for this is because when you
have a pen and a piece of paper, and you are putting your thoughts down, it allows you to
articulate clearly the thoughts in your mind and the feelings in your body that might just be hazy.
When you have it on paper, it is not abstract anymore, and you have something to work with.
The intention is to become better self-observers. Along with mindfulness and meditation, the
journal allows you to identify problem thought patterns as they are occurring so that you can
interrupt them and prevent them from swaying trading decisions, thus, redefining your present
experience.
In conclusion, trading like a scientist will allow us to make trading as systematic and mechanical
as possible. Along with journaling and the sample size exercise, there are several other key
actions you can take to get you there:
1. It is important that you take the time to research and plan your trading business; these
are essential steps in your overall success as a trader. This is not a profession at which you will
become skilled overnight. Traders who start trading too soon or without a well-researched
trading plan often find themselves back at the beginning with a lot less trading capital. Traders
who have realistic expectations and who treat trading as a business – and not as a hobby or a get-
rich-quick scheme – are more likely to beat the odds and become part of the group of traders who
succeed.
2. Focus on what you can afford to lose, rather than what you might gain. The critical
point of little bets is that they are little, therefore, if they don’t work, you won’t lose too much
and you can live to fight other battles. So many new traders start working on getting rich before
they even work on just being consistently profitable. This is a big mistake.
3. Focus on de-energizing beliefs that don’t serve you. You do this by doing what you
know you should do instead of letting your impulses get the best of you. This takes time and
effort, so don’t expect immediate results. It might take some people one or two sample sizes of
trades in order to consolidate inside their mind new beliefs conducive to successful trading.
Other people might require more sample sizes of trades. I know I started to see real changes in
my trading after a good 3000 trades. I am a slow learner. Everyone is different and we all learn at
different paces. So be patient and remember that Rome wasn’t built in a day.
4. Trade your methodology without deviating from it. Even though we talk about
"trading the markets", in the strictest sense we cannot trade the market, we can only trade our
rules. Our goal is not to catch every big move; in fact, we won’t, and no one does. Our only
objective is to take the money the market will make available for us each day, week or month
according to our rules. In the end the longer you trade, the more you will learn – engagement will
make you a better trader.
5. Prepare your action plan outside of market hours. This is one lesson that took me far
too long to learn. You cannot come every day in the markets, with no action plan on what you
are going to trade and how you are going to trade. Every single time you enter a position, you
need to decide beforehand exactly when you will exit that position. You need to know in
advance your maximum risk allowance per trade, the number of days you ought to stay in the
trade and other contingencies. Since you already know your levels – your profit target and/ or
stop loss parameters – all you need to do at this point is “click”. It is imperative that we make
these decisions before we enter any trade so as to minimize our emotional implication during
market hours. Many people come into this business with no forethought, only big hopes and
aspirations; however, as the saying goes: “If you fail to plan, you plan to fail.”

QUESTIONS

Do you have a methodology that has been proven to make money in the markets? Is it
discretionary (qualitative and subjective) or systematic (quantitative and objective) in nature?
What are the factors that prevents you from being mechanical in your trading? Do you honestly
think these factors can be overcome? How?

Before closing this chapter, I thought I should elaborate a little bit on the nature of markets so as
to provide you with further insights into their complexity. Much effort has gone into the study of
financial markets and how prices vary with time. Essentially, there are two mainstream theories
that have been the subject of heated debates for decades. In one corner you have the proponents
of the random walk theory who suggest that markets are governed by some kind of Brownian
motion (erratic and random motion), thus making them inherently unpredictable4. These traders
typically use derivatives such as options (when implied volatility is high enough) to try to profit
from the markets. In the other corner, there are other market participants who explicitly
subscribe to the cyclical – and somewhat predictive – nature of price movement that affects the
markets5. These traders expect to profit from ‘black swan events6 which according to them
happen more often than a normally distributed bell-curve would suggest.
The debate on who is right or wrong in their assumptions or assessment of how markets
intrinsically function is out of the scope of this book. I’m sure you can find some great books out
there that do a great job at providing the statistical evidence in favor of the random or the non-
random nature of markets. There are as many books on the non-random walk as there are on the
random walk hypothesis. Therefore, this can only lead to one conclusion: statistics are just
numbers; they can be biased and can be subject to personal interpretation. On their own,
statistics don’t prove or disprove anything. Alfred Sauvy, a French economist once said:
“numbers are fragile beings, if you torture them enough they’ll end up telling you whatever you
want to hear.” Therefore, regardless of anyone’s underlying assumptions about the nature of the
markets, I think we can all agree on three things:
1. Human psychology is the driving force behind price variations. Large amounts of
volatility often indicate the presence of strong emotional factors playing into the price. Fear can
cause excessive drops in price and greed can create bubbles
2. There is a random distribution between winners and losers. In other words, each
outcome to any trade in of itself is random
3. There are clearly people from both camps who do make money on a consistent basis.
The message I want to convey here is that regardless of methodology, beliefs, and assumptions
you can make money in the markets if you follow a disciplined approach and if you don’t act like
you know for sure where price is headed. The fundamental truth that both groups will agree
upon is that markets are unquestionably uncertain. Nobody knows for sure what can happen next
and you should be extremely skeptical of someone telling you otherwise. Regardless of your
underlying assumptions on the nature of markets, if you have an approach that has been
quantified and proven to work in the past, I think it is fair to assume that it has an equally good
chance of working in the future – assuming there is any value in analyzing the past. Having such
a structured approach to the markets that you can follow methodically, is the closest thing to the
Holy Grail you will ever find.
CHAPTER 3
CONSISTENCY: A REAL CHALLENGE
“Make sure your worst enemy doesn’t live between your own two ears” Laird Hamilton

Now that we have seen how the markets function and how at the most basic
level, trading is just a game of flipping weighted coins, many people will still agree that
acquiring consistency – in terms of execution and results – is not that easy. But why is it so? At
the most fundamental level, what makes consistency so challenging is that it requires learning
the type of mental skills that few people are used to learning. The skills I am referring to is self-
regulation and self-control. Those terms are often used inter-changeably but they are different7.
Self-regulation can be defined as the ability to stay calmly focused and alert, which often
involves – but cannot be reduced to – self-control. The better a trader can stay calmly focused
and alert, the more objectively he can analyze the diverse information coming in from the
markets; he can assimilate them, and sequence his thoughts and actions to act in harmony with
what he is seeing. For someone who thinks that self-regulation is really just a matter of someone
getting in control of his negative emotions, there is indeed little difference between self-
regulation and self-control; they are two sides of the same coin. However, self-control has more
to do with the goals you set for yourself. For example, if you say to yourself, “I will follow my
plan or my trading strategy diligently until the end of the week and I will assess the results then”,
your memory has to keep your intentions intact until the end of the week. That is not too hard,
but not simple either; anyone who has ever said to himself, “This weekend I will go jogging,”
knows how hard it can be to keep that intention afloat. Self-control is what helps you achieve
that goal. On the other hand, self-regulation is the ability to stay in the present and to focus on
what is occurring right now in your body. It nurtures the ability to cope with inner challenges
that are happening as a result of sensory inputs; be it, the market moving against you, or
someone screaming at you for whatever reason.
Without developing those mental skills to do (or not do) things that are (or aren’t) in our best
interest, it’s highly unlikely that we’ll be able to do what our methodology or trading plan is
indicating without making a number of trading errors. Good trading is an approach that consists
of little to no trading errors. The process is so eloquent and fine-tuned through years of practice
that those errors just cannot happen anymore – at least not as frequently as before. It is the
epitome of a well-oiled machine. A good analogy, typically on the basis of process and structure,
is the example of the Casino. Casinos base their entire enterprise on the idea of expectancy. In
simple terms, it is the act of focusing on the long-term results of a system, as opposed to the
short term fluctuations. The idea of expectancy is similar to self-control which is the ability to do
what you intimately know you should do for a long-term and more durable success, instead of
getting side-tracked by short-term emotional gains. For example: Cutting your losses and not
holding on to a position hoping it is going to come back; liberating yourself from the collective
actions of all the other market participants and thinking for yourself; taking every trade your
system signals you to take even if this means trading in the face of a losing streak or buying
when there is blood on the streets (and inversely selling when everything seems too rosy) are –
among others – abilities that pertain to self-control. In his excellent book called, Trade like a
Casino8, author and trader Richard Weissman takes the similarities between a casino’s process
and a trader’s process even further. He takes the example of an extremely wealthy individual
who enters a casino with a billion dollars. She automatically finds the cashier happy to change
her money into chips no questions asked. With that amount of money they unroll the red carpet
under her feet, greet her warmly with free drinks, snacks and various other freebies. However,
suppose that same woman walks over to the roulette wheel with her ridiculous amount of chips
and tells the croupier to put it all on the red, she will be politely informed that there is a
maximum table limit bet size of 10,000 dollars per spin of the roulette.
Why do casinos need table limits when the probability is skewed in their favor? They simply
know that despite the odds being in their favor, on any particular spin of the wheel it could come
up red and if it did, our friend here could potentially endanger the whole establishment. Although
each and every spin of roulette is random by nature, the house remains unconcerned because they
know that the probability is skewed in their favor over a series of spin. By using table limits, the
house forces the players to limit their bet size, thereby ensuring that they keep playing.
Eventually, the casino’s positive expectancy model will swallow up the entire billion dollars. In
trading, if we can just get ourselves to execute our trades consistently without any errors; apply
our proven edge (positive expectancy model) flawlessly and be rigid when it comes to risk
management (maximum table limit) then can we, as traders, take the role of the casino. No
matter how good a technical methodology is, turning our trading profits into a consistent income
just like the casino requires the ability to restrict ourselves from doing some things that our
methodology itself can’t help us with. For example, our methodology can’t force us to predefine
the risk of getting into a trade. If we do predefine the risk, our methodology can’t stop us from
not taking a predefined small loss that ends up turning into a bigger loss. Our methodology can’t
force us to move a stop closer to our entry point where we get stopped out and the market then
trades back in our favor. It can’t prevent us from hesitating and getting in too late. It can’t stop us
from jumping the gun and getting in too soon only to find out that the signal to actually get in
never really develops. It can’t stop us from getting out of a winning trade too soon, thus leaving
money on the table; nor can it prevent us from letting a winning trade turn into a losing trade
without having taken any profits. Our methodology can give us winning trades, but it cannot give
us consistent results if we are susceptible to making those kinds of trading errors.

If the casino was to drop its strict risk management practices (table limits) just once, it could run
the risk of devastating losses. However, novice traders have no problem whatsoever doing so.
This inability to self-regulate and self-control is what detracts their end results. Just like an
overweight person who has trouble sticking with a diet and a regular exercise schedule, if traders
can’t prevent themselves from doing the easy – and what seems natural – thing over the hard one
they will surely find themselves being part of those who consistently lose money in the markets
because they are unable to adopt the type of behavior that promotes positive results. At one
point, we have to decide in which camp we want to find ourselves in because consistency works
both ways. There is the good kind of consistency, which is often hard and painful; and there is
the bad kind of consistency, which is easy and provides quick but temporary pleasure. We have
to make a true decision about what it is that we want. Until we part ways with some ingrained
negative behaviors we will keep re-enforcing the very type of behaviors that prevents us from
experiencing trading success, aka, the right kind of consistency.
THE KEY IS WITHIN US
“You have power over your mind — not outside events. Realize this, and you will find strength” Marcus Aurelius

We all have psychological occurrences that are deeply ingrained within us. The psychological
occurrences I am alluding to are fear, anxiety, anger, frustration and so on. They arise when we
are faced with impulses that are transmitted to the brain from our sense organs. Some of these
psychological occurrences can provoke impulsive and instinctual reactions which I’m sure have
been instrumental to our survival when we were still living in caves. Although we have come a
long way since then, these psychological occurrences never left us, no matter how much our
lives have changed, no matter how much the world has evolved. This has to hint you on the
importance of every single one of these psychological occurrences. However, there are many
instances where these psychological occurrences escalate to the point where their influence on us
is such that they can impede our ability to live our lives in a way that satisfies us. For example,
fear can sidestep rational thinking in favor of a faster and more gut-feel response. This is great
when a bear is chasing you, but not so great when you are trading the markets. Taking profits too
early for fear of losing the profits at hand, or not pulling the trigger when a high probability set-
up is spotted might cause you to skip over some very lucrative opportunities.
Quite often, what results from these psychological occurrences is an imaginary rivalry between
us and what we perceive as the object of our trouble. It’s us against something; someone; the
markets. Even if we don’t realize it, it happens in our minds at an unconscious level. In trading,
traders will often personify the market and that makes it easier to shift on it the responsibility for
their losses, or inaction. In other words, it’s easier to play the blame game. If we want to have a
chance at even surviving at trading we have to temper our reaction to sensory inputs; because
behaving otherwise is in strict contradiction with the way markets were designed to make profits
available for us. It automatically puts us on the side of the masses – those who consistently lose
in the markets. Therefore, how can we free ourselves from those behaviors that don’t serve us?
By the end of the book you will get a clear and complete understanding of what you need to do
but right now the short answer is this: Breathe! Your breath is a perfect and accurate barometer
for your emotions. You can feel for yourself how stress affects the ease and pace of your
breathing. If you become aware of this strained condition, you can temper your emotions by
taking a few conscious breaths. Also, whenever you engage in any trading activity, contemplate
your thoughts, your state of mind, and your body. How does it feel to be you? What does it feel
like to be in this precise moment? When thoughts rush through your mind and psychological
states invade you to take possession of your body, observe and notice as if from a distance. Do it
as a matter of personal curiosity.
Our body is very eloquent; it exhibits a special set of symptoms for every psychological state.
For example when we are feeling angry, our mouth may go dry. Our muscles may contract when
we are scared. We may have indigestion when we feel anxious; our breath will also become
strained. Scores of symptoms can reveal themselves. If you simply observe them, notice and
enumerate them, as if you were a scientist running a science experiment, by the time you have
finished, the psychological state will have disappeared. Now, I’m not implying by any means
that we shouldn’t experience psychological states that are embedded in our nature. I am not
implying that we should reject our feelings and emotions. Being human is accepting the
complete range of emotions and psychological states that are inherent to our human condition.
That is what makes us complete. However, contemplation can free us from slavery to these inner
occurrences. It enables us to deal with them as they arise by not giving all of our energy to them.
THE IMPORTANCE OF TRADING RULES
“Discipline is doing what needs to be done even when you don’t want to” Zig Ziglar

Rules are sets of explicit or understood regulations or principles governing conduct within a
particular activity or sphere. In other words, they define acceptable behavior and are to be used
in specific environments and conditions. Rules are important because they help us live and deal
together. As an example, could you imagine if you and I played a game of Monopoly without
rules? Of course it would be a kind of mess. In the financial markets, there exist rules to protect
us from many things. However, few of those rules can protect us from ourselves because most of
those rules stop where personal responsibility comes in. Therefore, without regard for peripheral
details the only rules that could protect us are the rules we set for ourselves. Not risking more
than 2% of our total account on any single trade; putting a stop-loss and adhering to that stop-
loss without compromise; not entering a trade unless you see a valid signal on the chart;
refraining from any trading activity when you’re not in the right state of mind – all of these are
examples of rules you could set for yourself to guide your trading. Yet, a lot of us have a natural
aversion to rule-following, and this brings us back the idea of self-control. However, to get a
better understanding of this inability to follow our own rules, and to understand how we can
effectively change this, we need to search where lays the root of the problem: our impulses.

All of us are born with our own inherent behavioral characteristics. If we were to put a baby on
the floor while closely observing her for a few minutes, we would see that she would naturally
try to explore her environment. Curiosity is one characteristic that is common to all children, but
all of them aren’t naturally attracted to the same thing. In other words, out of all the things to be
attracted to that are available in the baby’s sight, she will naturally select and crawl to what she
wants to explore in the moment. It might be one particular object, a toy, her dad’s shoes or even
the sleeping cat. In any case, it seems like there is some sort of force inside of her that naturally
selects what she is attracted to in the environment out of the vast array of things that she can be
attracted to. This is inherent to any single one of us. Some social structures – this might be
families, parents, and later in life workplaces, religions, etc. – support these natural attractions to
some degree, however, others don’t. The problem is that, every time our natural attractions are
not supported – when we are denied the experience that we want as a result of these natural
attractions – we build up “denied impulses”. It’s like the desire for a certain type of experience
creates a metaphorical hole in our mind and that “hole” has to be filled with the right peg; that is,
experiences that only we – full individuals – desire. When a baby is holding something in her
hands, looking at it, exploring it, then someone comes and takes it from her. The response is that
she automatically and naturally starts crying because she is not done experiencing. Crying is a
natural mechanism to put her mind back into balance because the lack of that experience she was
wanting did not fill the “hole” in her mind.
Those “denied impulses” are what creates cravings for a lot of people. As stated earlier in the
book, craving is not to be confused with desire. Desire is not inherently bad. It pushes us to
accomplish things, to better our lives. However, the clinging to desire – which is craving – is
more of an insatiable hunger that can never really be stilled. Cravings can be conscious but they
can also be unconscious. In the 2005 movie adaptation of, Charlie and the chocolate factory,
Tim Burton greatly expands on Willy Wonka's personal back-story. For example, we learn that
he had a troubled past with his father, he was forbidden from eating candy of any type or
quantity and had torture device-like braces affixed to his teeth. The “denied impulses” he built as
a result of such cruel treatment resulted in him craving the very thing he wasn’t allowed to touch.
This led him to break his father’s rules and taste a chocolate. This is a good example of
conscious cravings; they will translate in the individual experiencing difficulties with self-
control. Unconscious cravings on the other hand, can find other – more subtle – ways to manifest
themselves. For example, suppose a teenager wants a career path that her parents don’t support;
they will deny her that choice. Later, she will undoubtedly end up as an adult with “denied
impulses” whether she is aware of it or not. She might be set on a great career path; she might
enjoy financial stability just like her parents envisioned for her. However, will she be happy?
Maybe. On the outside. Will she feel complete? Not necessarily. Remember, that “hole” inside
her mind is still there waiting to get filled. She might have forgotten about it or even suppressed
it, but it’s still there. It will never go away until she finds a way to reconcile that emptiness. Until
then, it will affect her life in ways that are subtle, but detrimental. She might not know why she
cannot find happiness in her current job despite all the advantages she has in that job. She might
not stand people who have the mental fortitude to do what they want to do. She might even
unconsciously deny her own kids the choice to do what they want to do in life. This happens to
us all the time. We live in societies that often deny us the choice to live and experience our lives
according to what we are naturally attracted to; according to our desires. Hence, this has
consequences on our lives.
For the ones who experience cravings, it is very difficult to exert self-control and to follow rules
– even their own rules. That is one of the many reasons why it is so difficult to become a
successful trader. It requires us to make our own rules and to strictly adhere to them. If we have
some conscious or unconscious cravings related to money, being right, and so on, it will
undoubtedly be an obstacle-course to exert self-control and follow our rules. In the end, it will
have a negative impact on our results. Generally speaking, we are all filled with desires brought
about by the prospect of having unlimited riches in. I am not suggesting that we should try to
remove ourselves to some place where this desire does not arise. Adopting an ascetic lifestyle or
becoming a hermit isn’t the point here. Heading to a monastery or convent wouldn’t do as well.
We might seek throughout the whole universe without ever finding such a place. Yet, such a
place exists within ourselves. When we turn our attention inwards and take notice, it becomes
clear that desire isn’t the enemy. However, clinging to desire – craving – impedes our ability to
think properly and to make rational decisions. Finding the right balance calls for an abandonment
of craving because it is precisely in this that all kinds of suffering lies.
In uncertain environments such as in the markets, we have the potential to cause an unlimited
amount of damage to ourselves. The only way to prevent us from damaging ourselves is to
institute our rules. However, if what we have is a backlog of “denied impulses” in the form of
unacknowledged and unresolved cravings, this will create this natural inability to follow our
rules. Therefore, when comes a situation where we should be taking a trade according to our
signal, or when we encounter another situation where we should cut our losses, we experience
conflictions. Our behavior becomes erratic and emotional, and this is clearly the antithesis of
good trading. To be successful in trading, we need to understand the importance of managing our
emotions, and adhering to our own set of proven rules that will guide our behavior so that we
don’t end up hurting ourselves. Those rules can be as basic as not trading during binary events,
and as complex as entering a trade in the direction of the 30 minutes opening range break out if
the daily chart provides an opportunity. Ultimately, it is up to you to figure out what works for
you according to your system, account size, personal preferences, risk tolerance and so on.
Implementing sound trading rules takes commitment and effort; however, ask yourself the
question, "would you follow your rules if you knew for a fact that there was a million dollars a
year job at the end of it?” Use this thought to fuel your desire to be and stay consistent; but make
sure you do not obsess about this outcome, for this fetter called craving is precisely what will
cause you to shoot yourself in the foot.
We have to be firm and follow our rules to the letter, and we have to be flexible in our
expectations into order to flow with the uncertain nature of the markets. Doing so will allow us
to gain a sense of self-trust that can and will always protect us in an environment that has few
boundaries. As a result, we will be able to perceive, with the greatest degree of clarity and
objectivity, what the markets are communicating to us from their perspective. Those are our best
defenses against uncertainty.
EMBRACING UNCERTAINTY
“As for the future, your task is not to foresee it but to enable it.” Antoine de Saint-Exupéry

Two very distinct elements in human nature separate us from other animals: our cognitive
abilities (thoughts and conceptions about our existence and the self) and the ability to consider
the future and make plans for it. That is our evolutionary gift as a specie. The second ability, for
instance, makes it possible for us to prepare ourselves for changes in the future, predictable as
well as unpredictable. Unfortunately, this ability also gives us the potential to over-think and
worry about future events – events in most cases that might never occur. We end up putting
ourselves in psychological states that stresses our organism, and this impedes our capacity to
perform to the best of our abilities. Our worries are a response to the uncertainty of the markets,
or even of life itself. Stress – resulting from this constant over-thinking – is the body’s way of
telling us that we are trying too hard; we are too attached to a particular outcome, to an idea, to
something, someone, etc. It is telling us that we need to give ourselves a break from all of this
and it is extremely important to listen!
I grew up in a very unstable environment. My parents separated a few months after my birth, and
early in life I was moved around needlessly by a narcissistic and emotionally dysfunctional
mother. At one point I was left to live with my uncle who perpetrated mental abuse and physical
violence on me. Later, I went to live with my father until I turned 16, after which my mother
took me back again. That wasn’t the end of my misadventure though – since her personality
disorders got worse with time, I was constantly belittled and mentally abused. In addition to that,
I was taught to fear failure and to reject being wrong. I was taught to be a perfectionist, and to
have an excessive love for money and material possessions. Needless to say that all the
emotional traumas and dysfunctional beliefs I inherited had a detrimental impact on the way I
perceived – and lived – life. Animals, humans included, that have been raised in an insecure and
difficult environment elicit higher stress response to mild stressors than those raised in stable and
secure environments. Defensiveness, oversensitivity, social phobia, inability to handle criticism
and feedback, lack of focus, insecurities, sleeplessness, chronic fatigue, depression, anxiety,
overall unhappiness – I had it all, and this definitely impacted the way I traded. I had a difficult
time accepting losses. I couldn’t get myself to pull the trigger and take advantage of the
opportunities the markets were presenting to me, because I craved that sense of certainty and
stability that I lacked when growing up. I also had a fear of making mistakes and of failures. I
would internalize every market action making it a right or wrong game. In other words, if I was
wrong, I would consider it as an attack on my ego and I would revenge-trade. I’m sure a lot of
you can recognize yourselves in this. Regardless of how we acquire our own dysfunctional and
limiting beliefs we have to strive to do a real work on ourselves, because the markets are a very
expensive place to sort out our problems. Fortunately, as a result of my humbling encounters
with my own mind, I learned to de-energize most of these impeding beliefs that were imposed
upon me, while also releasing the suffering that was passed on to me. It is a work in progress, but
I am now finally living a fulfilling life – both in trading and my personal life. I know today that I
am at peace with myself, more than I have ever been before because I decided to change my
perspective on the way I experienced things. I left my state of ignorance, of victim – the “oh,
everything is happening to me” mentality – to a place of acceptance, self-understanding and non-
attachment. It is a place of equanimity!
It is not surprising that so many people consistently lose in the markets. It is because they suffer
from the inability to embrace uncertainty, which itself is inextricably linked to a plethora of other
symptoms – as I have cited, the inability to accept and embrace failure, the absolute need to be
right, the inability to take actions, etc. A lot of what was instilled in us by authoritative figures
(parents, families, teachers, etc.), or by society as a whole, is utterly dysfunctional and
contributes to the creation and perpetuation of those pathologies. As an example, our society has
a phobia of mistakes and failures. This is a problem that begins early in life, in most elementary
schools, where we learn to learn what we are taught rather than to form our own goals and to
figure out how to achieve them. Society’s definition of intelligence is the ability to memorize; so,
we are fed with facts and we are tested on those facts, and those who make the fewest mistakes
are considered to be the smart ones. Therefore, we learn that it is embarrassing to not know, to be
wrong, to make mistakes, or to experience failure. We develop a fear of the unknown, and an
apprehension of uncertainty. We develop (and cultivate) a passion for perfection.
Our education system spends virtually no time on teaching us that it is okay to be wrong. It
spends no time teaching us the value of learning from mistakes and failures; yet this is critical to
real learning. Dr. Van Tharp brilliantly puts it in his book, The definitive guide to position
sizing9:
“The educational process in most industrial countries came about not to really educate our children, but to develop good
workers for our factories and other businesses. When most people worked in agriculture, we didn’t need a great educational
system – it was just for the chosen few. But now we need "educated workers" to help with our businesses. Sure, we want these
highly skilled workers to be able to think and come up with new ideas. But we also want them to be good employees and do what
the boss wants them to do. So how do we do that? We do it through our educational process where children learn that the
teacher is always right. Early you learn that if you got less than 70% at tests, you are a failure. And you don’t get an excellent
mark, an A, unless you get 94% correct or better on your tests. When you show that same mark to your parents the answer is
usually "why didn’t you get 100%?" They want you to be right as well. As a result we grow up with a passionate need to be
right. If you are not right at least 70% of the time you are ostracized as a failure. But you want to be right 100% of the time so
that your parents won’t criticize you. As a result you even criticize yourself first so that you can correct the problem before your
parents start to criticize you.”

School doesn’t teach us true intelligence, which is the ability to be in touch with our inner self –
that place of inner calmness, beneath the constant thoughts where creativity resides. It doesn’t
teach us from a young age how to understand what is going on in our mind so that we can create
better and more fulfilling experiences. School doesn’t prepare us for real life, unless of course
our lives are spent passively working for others. For us who decide to embark on a self-directed
journey of trading the financial markets, our initial awareness of the markets is mostly through
financial media which erroneously depicts trading as a right or wrong venture; where you are
rewarded for making predictions and staying firm to your convictions in any particular markets
(or trades). The presupposition of all this is the emphasis on having to be right in order to
succeed in this field. This, again, re-enforces in our collective mind this already existing belief of
right=good and wrong=bad. That is why we see novice or unsuccessful traders often being
obsessed with market analysis and indicators. They crave being right, although few would admit
it. They crave the sense of certainty that analysis and the numerous indicators on their charts
appear to give them. They are desperately trying to create certainty where it just doesn’t exist. In
our rushed modern society, we are extremely rational and analytical on a high intellectual level.
We’re able to create a certain degree of certainty in many areas of our lives. However, the
complexity and uncertainty of markets – especially rapidly changing markets such as you see
nowadays – escape all the models and formulas we implement to gain a sense of certainty. This
lack of control stresses and frustrates us. In a world where picking the right stocks is emphasized
by everyone the average traders armed with a perfectionist bias come into the markets and think
they can control their success by just picking the right stocks. So, when they lose money, they
naturally assume that they picked the wrong stocks. If they used a technical methodology, they
assume that it doesn’t work. So they change it. Thus, they never learn some of the key factors
that are important for success, namely learning from mistakes and failures, perseverance, and
having a given set of rules to guide their actions.
The markets reserve the right to change direction at any given point, with no regards whatsoever
to our expectations, beliefs, trading models, trades we have on, and so on. However, if we adopt
an attitude of observance instead of involvement, we can find deliverance from most trading-
related woes. “I observe what is happening in the moment so that I can be open to learning
instead of internalizing the action and feeling hurt, frustrated and angry.” It might feel counter-
intuitive to do that, because we have this tendency to take everything personally. Therefore,
accepting uncertainty and sitting with it can prove to be a daunting task. Yet, this is precisely
what we should do. This is the key to any durable trading success! If you want a comforting
thought, here’s one: do this and you will instantly separate yourself from the masses and you will
be miles ahead. This will make all the difference because ultimately, good trading is a function
of how calm you can remain in the face of constant pressure. Liberating yourself from impeding
behaviors and mindsets is a choice – albeit a pretty tough one – but the best traders, and the best
performers in any high performance field have done that at some point. They may or may not
have done it systematically or methodically but they undoubtedly overcame these mental
resistances one way or another. The reality is that markets are neutral. At the most fundamental
level, every uptick or downtick is just information, is it not? So by definition, everything that
happens doesn’t happen to you. It just happens. It’s merely information. You are the one putting
context and meaning behind that information according to what you perceive is happening;
according to all your beliefs and past experiences. This leads you to approach the markets from a
“protagonist and antagonist” perspective – you being the protagonist and they being the
antagonists. But the markets are not “out to get us.” Quite the contrary, they provide great
opportunities for the prepared ones. I like to view it as a young coconut. You have to have a
sharp knife (trading strategy) to open it. Also you need some skills to use that knife efficiently or
else you might end up hurting yourself instead. If your ability to open the coconut is aligned with
the quality of your knife (your trading strategy’s performance), there is a very good chance that
you will open that coconut and what will await you is a delectable nectar and meat.
Impermanence and change are undeniable truths of our existence – not merely of the markets.
The attachment to – or the craving of – an illusory market certainty is what creates suffering for
us traders and it’s only when we release ourselves from this fetter that we can find true freedom
– to do whatever we set ourselves to do, without any fears, doubts or any other internal conflicts.
Reaching such a stage of equanimity implies that:
1. Regardless of the dysfunctional beliefs you may have acquired throughout your life, you know
where you want to go. You know what needs to be done to steer your trading in the right
direction. Your intention and your goal are both aligned.
2. You have embraced uncertainty, however uncomfortable it is. You employ techniques like
conscious breathing and meditation to deal with inner conflicts. Conscious breathing helps you
gain more oxygen in your organism. A more relaxed nervous system helps you become better at
managing the pressure and the uncertainty of the markets. Meditation, on the other hand, helps
free you from uncomfortable psychological states. For example, watching your frustration from a
detached perspective as it arises makes it disappear within a few instances.
3. You are flexible in how you approach your trading challenges. If you kept doing what you’ve
always done, you would keep getting the results you’ve always got. However, this is not your
reality anymore. You go with the flow. It is much easier to trade fearlessly when you embrace
mistakes and failures as your teacher.
4. You have stopped the over-thinking. You live completely in each moment. In other words,
you gave life to your current situation. The only time you ever are is now, and the only place you
ever are is here. You are with your opportunity in the markets, your losing trade, your winning
trade, your realized loss, whatever it is. You are aware of your body and your psychological
states as they arise and as they disappear. You do not merely “remember” later that you sat
down, entered a trade, exited another, etc., you are aware of doing so, at the time it occurs. This
habit of staying here in the moment has been practiced, developed and well-perfected such that
you now assume mastery over fear and greed; right and wrong; over anxiety. You are not over-
come by any of these states and beliefs, but you subdue them as they arise. This is the essence of
equanimity.
This equanimity that I keep alluding to is achievable by anyone; and it is something you should
strive for, not only in trading but in your personal life as well. Is it easy to achieve? No – but it is
possible. We change all the time, just the way markets ebb, flow, and change structure. It is a
fallacy to believe that a person would remain the same person during his entire life-time. He
changes every moment. Furthermore, if he consciously wants to change an area of himself, he
has the ability to do so. Nothing is constant but change itself! Change is intrinsic to everything
that is – even the universe is in constant change – and we are not immune to this phenomenon.
Right from the moment we are born into this earth we are exposed to a continuous flow of
information. Our brain acts like a sponge and we take in everything that comes our way. We
don’t discriminate or select what we want as to what comes in – it comes in anyways. And when
it’s in, it never gets out. As our lives progress – as we grow – new information comes to our
attention and either adds to or retracts from our existing beliefs. For example, if some
unfortunate events happened in your life making it that you now have an aversion to cats, every
time you encounter a cat, you will see it through your filters – i.e., your beliefs – regardless of
whether that cat is friendly or not. Furthermore, every time you see or hear a cat hissing and
growling, this will contribute to your already existing beliefs that cats are all evil. These kinds of
associations happen all the time; we don’t have to think about it, it is an automatic process.
Similarly, if we have an aversion to failure, or to being wrong, it will only cause us to see the
markets through such sets of filters. We might think that we are seeing the world objectively as it
is, but this is not the case. We see it through our beliefs, and if our beliefs are dysfunctional in
nature, we might be looking at the world in detrimental ways. That is why if we want to thrive in
the markets it is so important to work on de-energizing the set of beliefs we have that doesn’t
serve us well. We do this by accepting that those beliefs are present within us in the first place.
This is the only method I know of that works. You accept what is in you to be able to move on.
The way I define acceptance is that you are at peace with something. When you are at peace with
a belief, you are better armed to render it nonfunctional if need be. Then you challenge yourself
by analyzing, contemplating, and putting into practice what you want as new beliefs. For
example, if you think you are fat, there must be some beliefs you hold about yourself that makes
you think that you are fat. If you don’t like this image you hold about yourself you have to render
those beliefs nonfunctional. First you must accept that those beliefs – whether they are grounded
in reality or not – are a component part of who you are. But then you have to make a true
decision that you don’t want to be fat anymore. So you start doing things that fat people don’t
typically do. You work out. You start a diet. Over time, this will slowly de-energize your
existing beliefs about you being fat and it will gradually energize your new sets of beliefs about
you not being fat.
Good Trading is a function of us believing without a single doubt that anything can happen in the
markets. For the “enlightened trader”, there is no dilemma. To paraphrase Mark Douglas10, he
approaches every individual trade from a carefree mindset. This trader has no internal conflicts;
he just does what he has to do without judging or praying. He knows that any thoughts of past or
future are irrelevant. They are fragments of his imagination and don’t hold any ground in reality.
The present is the ultimate truth, and the markets are going to do what they do best in that
present moment – i.e., fool the most amount of people. No amount of rationalization will change
that. Therefore, the best way to counter such unpredictability is to be mechanical – the trader
predefines his risk, and when a trading opportunity presents itself he puts on the trade. The trade
could turn into a profit; obviously he placed the trade because his signal was telling him that
there is a higher chance of it happening, but it can also turn out to be a loser. Therefore, it is
counter-productive for him to overthink, overanalyze or even judge whether the trade is going to
work or not. In other words, he doesn’t take any of the markets’ actions personally. At the end of
the day, he knows his probabilities and he puts his faith in the numbers.
LETTING GO OF EXPECTATIONS
“A man must know himself thoroughly if he is going to make a good job out of trading in the speculative markets” Jesse Livermore

The amount of money we accumulate in the markets isn’t solely a function of how much time we
spend exposing ourselves to the opportunities. It is also a function of our state of mind. If we are
in the most conducive state of mind, we will make – and keep – money whether we trade 10
minutes a day or 10 hours a week. However, if we are not in the most appropriate state of mind
then we shouldn’t be trading because one way or the other, we will be the authors of our own
misfortune. Early in my trading career, I didn’t think of trading as a performance-based endeavor
where you have to be on top of your form day in, day out. Like most, I came into this business
with my backpack of insecurities, denied impulses, bad habits, fears, and so on, thinking that I
would make it as a consistently profitable trader without a profound work on myself. Little did I
know that by being mentally unprepared, I was actually preparing to fail. It’s only when I was
faced with mediocre results months after months, year after year, that I finally got it: something
was out of whack with my expectations. I decided to take a break from trading, and I went to my
first meditation retreat. There, right in the middle of a meditation practice, unable to calm my
mind I thought of all my past mistakes whether they were trading-related or not. I got angry and
frustrated at myself, so much that tears started dripping from my eyes. Right then, at that very
moment, I had a great epiphany: How did these feelings and mental occurrences assert so much
control over me? With great curiosity, I began watching them swirl in me like a cyclone. A few
moments into this observation I noticed something rather peculiar. I felt detached from those
feelings, as if emancipated from them. I still felt the feelings swirling within me, but since I was
merely observing them they didn’t seem to have any control over me. A deep peace settled
within me, and soon enough the feelings began to dissipate, just like a cyclone loses its intensity
and slowly fades away with time. All that time, these “fetter feelings” defined who I was because
I was unconsciously letting them have power over me. I was associating myself to them and in
some ways I was attached to them without even knowing it. At that very instant, something
profoundly changed in me. In the face of everything – i.e., beliefs, life cycles, circumstances, etc.
– that may predestine us for a certain path or behavior in life we still have the element of choice.
This is very powerful and it is intrinsic to our human nature. We can steer our lives in whichever
direction we chose to, and meditation can bring you tremendous insights into this. It can allow
you to see past what you think you are. Sitting calmly with your eyes closed can allow you to see
past the filters through which you see the world so that you can truly see things for what they are
and you for who you are beneath your thoughts, emotions, and beliefs.
Dealing with uncertainties requires that we understand ourselves in such a way that we can act in
harmony with the way the markets are. This is not as difficult a task as one might be inclined to
think, and believe me you don’t have to “hit rock bottom”, like it happened for me, to see any
transformation in you. Working on ourselves only requires that we pay attention to ourselves.
This is not hard in and of itself. The only reason I can think of why this would seem tedious even
more so difficult is because we aren't taught how to do it when we are young. As a matter of fact,
we are usually taught exactly the opposite – that our mind is a mysterious place that can only be
understood by experts (psychologists). We are taught to suppress what we feel in such a way that
we forget that what we are feeling is still there. Since we lose our ability to pay attention, we
never see that the feelings never went away. And they never will until we acknowledge them,
and reconcile with them. We become slaves to our beliefs – the filters through which we see the
world –, and we are chained by our thoughts and emotions. As a result, most people end up
living their lives in a way that is lacking any obvious understanding as to the relationship
between their mind (inner environment) and the outside physical environment. This lack of
understanding ultimately shapes the way they experience their lives.
You may not know this, but Bruce Lee's martial art could not have been as successful and
complete without the deep philosophical base he gave it. Martial arts, by nature, are a reflective
practice where the practitioner must not only examine the issues of life or death but the nature of
the self. Bruce Lee once said:
"When you're faced with looking at your own life with awakened eyes, you will have increased a bit in the knowledge of yourself,
and knowledge of anything outside of yourself is only superficial and very shallow. To put it another way, self-knowledge has a
liberating quality."

This statement is particularly important for us traders because it pushes us to rethink our
relationship with the markets. The markets don’t generate good or bad; happy or painful
information. From their perspective, every up tick or down tick is merely information. It may
seem as if they are causing us to feel the way we feel at any given moment, but this is not the
case. It is our own mental framework that determines how we perceive information. We don’t
see things as they are; we see things as we are. We are the stream of our thinking which is
conditioned by the past. When we liberate ourselves from our thinking, not only will we find the
clarity to witness markets’ actions from a detached, curious and impartial standpoint, but also we
will also be able to pull the trigger on our trades without any attachment, expectations or fears.
Furthermore, with the above statement, Bruce Lee enlightens us to the true nature of life itself, so
that we can get a better understanding of ourselves – our goals, aspirations, motivations, etc. As
stated before, we live in a world that is constantly changing to various degrees. The book you are
holding is currently changing even if you don’t see it. The markets are ever-changing. You are
also experiencing changes physically as time passes, but also within. The whole universe is
changing and shifting. There is no constant but change itself! When we acknowledge this, it
forces us to look at ourselves in the mirror, and reconsider what we think we know about
ourselves and the environment that surrounds us. This is important because, when we understand
that everything is impermanent, changing, transient, we come to realize that there is no point in
getting attached to anything – be it, certainty, a trade outcome, money, being right, and so on.
The degree to which we are attached to – or crave – anything, in any way is the degree to which
we will suffer.
When trading, so much of our negative mental occurrences – frustration, disappointment, anger,
irritation, etc. – come from our expectations. We build these expectations according to what we
think the markets should do, the amount of profits we think our next trade will give us, where the
markets will cease to move against us, etc. But when reality doesn’t meet our delusions, we
experience stress, in the form of the mental occurrences I just mentioned, and this brings along
physical discomforts as well. If we don’t deal with those occurrences they end up fueling new
habits so that every time we are faced with some similar situations in the markets or even in the
outside world, we experience the same kind of physical and mental occurrences. A pattern is
formed. But this works both ways. Just like we create negative habits or patterns by not taking
any actions, we can create positive habits or patterns when we do take actions. Below are three
simple steps you can take.

1. Breathe
Most people are not very conscious of how they breathe. In particular, poor breathing habits are
common among traders. There is no scientific research behind this thesis, but, it should be
obvious because of the high level of stress proper to this trading endeavor. Our breathing is a
perfectly accurate and honest barometer for what is happening inside of us. We can feel for
ourselves how stress affects the ease and pace of our breathing. Cultivating awareness of the
present allows us to become aware of this strained condition, so that we can “heal” ourselves
simply by taking a few conscious breaths – slow, deep and soft. When we do so; instantly, we
find a deep peace settling slowly but surely in our mind. This is conscious breathing. It is quite
elementary but extremely impactful. Taking soft deep breaths provide us with an immediate
sense of how we can manage the uneasiness in our body and our thoughts, when we are in a bad
position whether it is in the markets or in our every day-to-day life. By simply controlling our
breath, in time, our nervous system becomes conditioned, which makes our unconscious
breathing deeper, calmer and more harmonious. By consciously taking hold of our breathing, we
have a unique opportunity to change and strengthen both our body and mind to respond more
appropriately in times of stress.

2. Sit
Sitting with your eyes closed, in a calm and quiet space can allow you to develop awareness of
your mental occurrences – as they arise and as they disappear. When you are aware of this, you
gain insight into your true nature: You are alive; living, breathing, and at one with everything.
You realize your inter-connectedness with everything that is, and you lose the desire to exert any
control over anything. You just are! What may be expected from such meditative practice of
contemplating the body and mind if practiced regularly, developed and well-perfected is mastery
over delight and discontent, over fear and greed, over right and wrong, over past and future, etc.
You are not overcome by these states or thoughts, but you subdue them as they arise. I talk more
about meditation in Chapter 4.

3. Let go
This is a mental exercise I want you to do. Picture all the expectations you have for yourself, the
markets, your trading results, your spouse, your kids, your coworkers, your job, the world. Take
them from inside you, and toss them into an ocean. See them float away, carried out by waves.
Watch them go. Now picture your life without them. How is it? How does it feel? A life without
expectations means you accept yourself for who you are, the markets for what they are, reality
for what it is, and people for who they are, without trying to force anything or anyone into the
containers you have for them. You see things as they are and you let them be. It is a life where
you don’t need to be disappointed or frustrated or angry – or if you are, you accept it, and then
you let it go. That is not to say you that you never act. You can act in a way that is in accordance
with your values, and influence the world, but never have an expectation of how the world will
react to your actions. If you do something good, you won’t expect praise or appreciation. If you
placed a trade, you won’t expect a winner on this particular trade. Let those expectations of
reward and praise float away with the waves. Do the right thing because you love doing so, but
expect nothing beyond that. Always pay attention to your thoughts. Don’t beat yourself up if you
have expectations. Just see them; acknowledge them, but then toss them in the ocean.
Each person’s life can be viewed as stories, and within these stories are themes and patterns that
point to underlying, unconscious processes. The degree to which we are aware of these processes
affects our choices about how we take daily actions, solve problems and behave. We can change
our story and in doing so, change our life; it can really be that simple, but simple is not always
easy. To change our story we must change, by altering our perceptions and by making conscious
decisions. However, with any change of such magnitude, we are challenged to just start already.
This is where most will quit way before they even started because change for them is hard and
frightening. It requires that we do things that are challenging and uncomfortable; but, the
possibility for improvement is there and freely available for anyone who is willing to take the
step.
LETTING GO OF ATTACHMENT
“Most of our troubles are due to our passionate desire for and attachment to things that we misapprehend as enduring entities.” Dalai
Lama

If there is one thing we all have in common it is that we want to feel happy; and on the other side
of that coin, we want to avoid hurting. Yet we consistently put ourselves in situations that set us
up for pain. We pin our happiness to trade outcomes, people, circumstances, and things, and we
hold onto them for dear life. We stress about the possibility of losing, and then we melt into grief
when that happens. We cling to feelings, thoughts and beliefs as if they define us, and ironically,
not just positive ones. If you have wallowed in regret or disappointment for years, it can seem
safe and even comforting to suffer. In trying to hold on to what is familiar, we limit our ability to
see and experience other more satisfying possibilities. When we stop trying to grasp, own, and
control the markets or the world around us, we give them the freedom to fulfill us without the
power to destroy us. It is our struggle with impermanence and change that causes us to cling onto
everything. The change itself isn’t the problem — it’s fighting the change, apprehending the
change, not wanting things to be different for fear of pain and suffering. Doing so creates the
very experience we are trying to avoid. The failure to understand that we must eventually let go
of everything – those around us, money, possessions, and ultimately our own being and identity
– is the root cause of all grasping, clinging, sorrow, grief.
The subject of letting go of attachment is very personal to me and I have been thinking a lot
about its implications for a long time since I had been holding on to resentments against a few
people in my life. As said earlier, my childhood and the earlier part of my adult life have been
quite tumultuous, to say the least. Therefore, in my mind, it seemed fair and justified to hold and
cultivate resentment towards the people whom I thought were the cause of my troubles.
However, little did I know that the mere act of holding and clinging to the negative mental
energy (dysfunctional beliefs, negative thoughts and feelings) had been affecting my progression
in the markets in ways that I didn’t even think were possible at that time. In order to achieve
success as traders we need to have harmony between what we are doing and how we feel. Our
thoughts and feelings definitely affect our judgment; our judgment affects our behavior, and our
behavior determines where we end up in life. So the dysfunctional beliefs, and the negative
thoughts and feelings I was cultivating were being translated into self-sabotaging actions, not
only in trading but in my every day-to-day life. And most of the time I wasn’t even aware of it.
It’s only when I sincerely decided to take a step back in order to gain perspective on my life that
I truly found within me the genuine desire to let go of my past and everything it encompasses –
the negative mental occurrences that constantly dwelled in me, the physiological repercussions,
etc. I had this great epiphany that the clinging wasn’t serving me at all. It was actually preventing
me from growing intellectually and spiritually; therefore, by definition it was holding me back
into a past that was full of suffering. That past was long gone; yet, it was still there, within the
confines of my mind, and I was letting it affect me. As a result of this realization, I decided to no
longer seek self-identification in those painful experiences. I began working on letting go of
anything I caught myself clinging on to – be it things that brought me happiness or things that
brought me pain and despair. In other words, I shifted my perspective from being someone who
held on to anything, to someone who embraces and appreciates the transient, ephemeral, ever-
changing nature of everything. You can never completely rid yourself of clinging but you can
minimize it to the extent that you are not engulfed by it, because you are able to catch yourself
the moment you are getting attached to anything. The Practice of non-attachment is a process – it
is something that you must continuously work on. Looking back, I can say that the quality of my
life has greatly improved thanks to this shift in paradigm. I am in a better place to appreciate
every moment-to-moment experience life has to offer, good or bad, because I do not fear losses
and pain anymore. Of course I do not wish for them, but when they inevitably occur I am able to
find beauty and wisdom in them. The pain I undeniably feel from time to time is released as soon
as it is felt. Conversely, I don’t get too excited when something good happens to me because
‘this too shall pass11’ and any clinging would unavoidably result in suffering.
The practice of non-attachment is the essence of living fully in the present. When you feel
compelled to attach yourself physically and mentally to anything – as if it gives you some sense
of control or security – focus and listen to your breath. Within a few minutes the organic up and
down movements of your belly will make you more grounded. The more you are in touch with
yourself in the midst of those occurrences, the greater changes you can create in your thought
patterns. Slowly with time, you will begin to appreciate things with a sense of freedom, peace
and love as opposed to a sense of ownership, anxiety, and fear. Of course, this is not easy to do
and one shouldn’t expect to be good at it right from the start. Implied within the word “practice”
is the idea of repetition. Repetition is key! Tomorrow may not look the same as today, no matter
how much you try to control it. A relationship might end and you might have to move on. You
might have to endure a significant loss in the markets as a result of an unfortunate event that was
out of your hands. When those moments come remember that the pain that comes with them is
impermanent and passing. Breathe! Count your blessings. And the first one in the list should be
that you are thankful to exist in the first place and to experience life as a human, with all the
states and conditions that are inherent to it. Do you know the mathematical probability of your
existence? Dr. Ali Benazir from Harvard attempted to quantify the probability that you, me or
anyone else came about. His calculations revealed that the odds of us existing are close to zero12.
He illustrates it this way:
“It is the probability of 2 million people getting together each to play a game of dice with trillion-sided dice. They each roll the
dice and they all come up with the exact same number—for example, 550,343,279,001.”

In other words, just the mere fact that we are here – me writing this book and you sitting
comfortably while reading it – is a miracle in and of itself. So as long as you fail to recognize the
true value of human existence, you will just fritter your life away in futile thoughts, activity and
distraction. Then, when life comes all too soon to its inevitable end, you will not have achieved
anything worthwhile at all. But once you really see the unique opportunity that human life can
bring, you will definitely direct all your energy into reaping its true worth.

Attachment to the past

The ability to remember past experiences is useful and important – it is the power or process of
recalling to mind previously learned facts, experiences, impressions, skills and habits that allows
us to navigate and make sense of the present. However, when this ability to look backwards is
used for unfruitful purposes such as overthinking and worrying, it impedes on our awareness of
the present moment and actually detracts our capacity to sustain growth. Every time we carry
around thoughts of the past, it takes up so much space in our brain that it prevents us from living
in the present. In other words, we become oblivious to the present. Minutes, hours, and days pass
by as if in a dream. We might remember what happened at a particular moment, but we weren’t
fully present at that very moment because our mind was elsewhere.
Can you imagine how your life would be if you could totally and immediately let go of what
happened in the past? The choice is yours. Look at it decisively, feel the emotions that are
brought up by the mere thought of that past. Confront that past but don’t fight it. Did you
decimate your account because you couldn’t take a small loss? Did an unfortunate event occur in
your personal life? Understand that there is nothing you can do anymore. You cannot change the
past. Paradoxically, acknowledging your inability to change the past will empower you to extract
wisdom out of those experiences and to move on. Acceptance is liberation! Just like with the
“letting go of expectation” exercise I presented earlier, bring the past to seashore and kindly
place it into the ocean. Watch it wash away. Once it is gone, make it an intention to be present
and to focus on the now. And every time the past comes back again in your mind, do the same
thing. Bring it to the shore!

Attachment to money
Money is one of the most common things people become overly attached to because the idea of
not having it (or not having enough of it) automatically triggers an inherent survival mechanism.
The more primitive and instinctual aspects of our mind-body have been hardwired to stay alive.
Anytime that mechanism is triggered – every time we believe our survival might be in jeopardy -
our natural instincts are to fight or flee. This is often caused by the mind imagining the worst
case scenario when, in actuality, reality might prove to be completely different. Such attachment
– to money – only arises when we are over-identifying with our ego’s story of survival. As poet
and Zen Master Peter Levitt puts it: “It’s the Me show playing over and over and over again in
our mind.” We need that money to fulfill our needs; to make us psychologically complete; to
give us a sense of belonging; to bring meaning to our existence, and it is this over-identification
with the self that lessens our ability to trade efficiently, with ease. This is so because where there
is attachment, there is psychological resistance. Attachment is always the culprit hindering
everyone’s ability to take rational and impartial decisions. It prevents us from being in the
present moment, and this is what detracts our capacity to be – and stay – consistent in our results.
Many people come into trading with grandiose dreams of future prosperity. From personal
experience, craving for such prosperity impedes on our ability to manifest money in our lives in
the present. The feeling of not having enough of; of always needing more; of always wishing,
hoping and praying for more, impacts our decision-making process in such a way that in some
instances we can be completely striped of rational thinking. This makes trading a losing battle
because we will deviate from our methodology which is supposed to give structure to our whole
trading operations. This is true for many things in life: if we focus too much on thoughts and
feelings and not enough on the present, this affects our experience of the present and impedes on
our performance. For instance, a friend of mine whom I will name John for privacy purposes
came to me at one time asking for some tips on how to build the foundations for a strong
relationship. After his first and only long-term relationship, he was left heart-broken. Since then,
he wasn’t able to build any kind of long-term relation with his ensuing partners, and because I
had been in a relationship for quite a while, he figured I had some kind of knowledge or
understanding of how to. I am definitely not an expert in relationships, but John’s problem
wasn’t hard to understand. He had a very successful career in one of the most prominent
financial firms in the U.K and had no problem manifesting money for himself. However, he was
never able to crack the code to any meaningful relationship. He had a mediocre social life to say
the least and his partners would almost always dump him within their first month of dating.
Ironically, the answer to his problem was right in front of him all along. He was able to amass
some significant money in his trading career because he didn’t care about it. He didn’t overthink
and stress himself to paralysis. However, he did the opposite in his love life. John is a great guy
to be around, but constant negative self-talk, overthinking, or even trying too hard, prevented
him from being himself with women. The wound of his first meaningful relationship was still
open and it was preventing him from being fully in the present moment – it prevented him from
being natural. He thought he had to be and act a certain way for women to appreciate him. He
was trying too hard. Every time a relationship went over 2 weeks, he got overwhelmed with
anxiety and ended up saying or doing things that didn’t serve his best interests. Paradoxically, it
never dwelled on him that his fluency and ease in his trading career could be transposed to his
relationships. Obviously he was doing something right there – he didn’t overthink or stress. He
stayed fully focused on the present and went with the flow.
As humans, we are more concerned with having than being. When you practice the fine art of
non-attachment; when you are in touch with your inner-self, at peace with past and future, and
non-attached to needing a massive bank account overflowing with money, you can finally relax
into just being. Paradoxically, through letting go of your attachment to money you allow the
markets to fulfill you. Detachment enables you to be fully open and receptive to the opportunities
the markets hand you on a continuous basis. Each time you are honestly detached from having
your desire manifest, it will materialize for you much faster and far easier. Even though it seems
like we all have to have money to exist in this world, we should free ourselves from the belief
that money will bring us the happiness we aspire to. Studies13 show that money is definitely a
contributing factor to happiness, however, if your potential for happiness only relies on the
amount of money your bank account holds, then you will merely experience conditional
happiness – which is brief in its nature and unsatisfying. When we stop relying and obsessing
about the prospect of vast riches that the markets will make available to us in a near future, then
we allow it to manifest in the present. Contentment, joy, and peace felt in the present allow us to
see market action beyond ourselves. In other words, by being completely immersed in the
present, we can see the markets objectively for what they are and we will be able to manifest
prosperity by simply being able to respond appropriately to the opportunities they make available
to us at all times. If you are dissatisfied, frustrated, or angry about your present circumstances or
situation, that still may motivate you to do what it takes to become rich. But even if you do make
millions in the markets you will still experience the feeling of lack. There may be exiting
experiences that money can buy but they will come and go while always leaving you with an
empty feeling, or a need for further physical or psychological gratification. This is not happiness,
it is slavery! That is one of the main points in movies such as Wall Street (1987) or The Wolf of
Wall Street (2013), where the main characters are shown indulging in an excessive lifestyle; yet,
unable to find contentment. There is that permanent feeling of needing more, always and always,
at any cost. Deep down there is a perpetual feeling of un-fulfillment.
Elon Musk who was recently interviewed by Neil deGrasse Tyson talked about a little known
fact about his life. At a young age, while still in college, Musk famously began thinking about
humanity’s greatest challenges. He identified areas such as renewable energy and space
exploration, efforts he now leads at Tesla, SpaceX and SolarCity. But before all that, Musk
looked for proof that he would be okay if the grand endeavors failed, and he had almost nothing.
He explained:
“In America it’s pretty easy to keep yourself alive,” Musk explained. “So my threshold for existing is pretty low. I figure I could
be in some dingy apartment with my computer and be okay and not starve.”

Musk decided to see if a $30 food budget could get him through a month. He bought mostly hot
dogs and oranges in bulk, and would occasionally switch it up with some pasta and jarred tomato
sauce. He pulled it off. It gave him the assurance that he didn't need a comfortable salary to
survive, allowing him the freedom to pursue his loftier goals. A trader is above all an
entrepreneur. Do you have what it takes to lead the life of an entrepreneur? If you think you do,
try living off only a dollar a day for a month. This is a great exercise on contentment and non-
attachment. Do the experiment and see for yourself where it leads you. Most people can’t
because they are so attached to their ways and comforts; however, when we set out to test our
limits in such a way, we often learn to appreciate the true definition of struggle, hard work and
the value of a dollar. There is a widespread idea in the collective mind that traders have it easy.
It’s not always the case – especially on the retail side of the business – and there are too many
traders out there who lack the intellectual honesty to admit it. I don’t make money every month
in the markets, and I don’t know any retail traders who can say for sure that they are going to
make x amount of money from trading every single month. Since there is a rather strong
uncertainty component intrinsic to this business, I have to live below my means in order to
absorb any potential losing month(s), which is bound to happen at some point. This has taught
me that I didn’t need much in order to live a happy and decent life. Since my current interest is
travelling the world, I only carry a small luggage. All my material possessions fit in there. I don’t
possess a car, a house, heck I don’t even have a phone – I don’t need to own such things for they
are not essential for my survival. There is something powerful that comes with the realization
that you don’t need much. We were born free, but then we started accumulating things as if they
were essential to our happiness – as if they defined who we were. Don’t get me wrong, I’m not
implying that wealth and possessions are not important, because they are; but, on their own they
cannot bring long-term and durable happiness. They can only fulfill us if we have learned to
fulfill ourselves unconditionally. In essence, what I am stating is that, happiness comes as a
result of our liberation from attachment.
Our lives should not be resumed to a game of chasing wealth. If that is the sole purpose of our
existence, then suffering can only be the outcome. I strongly believe that we are all meant to do
something greater than that. Spending time with loved ones; learning how to live with ourselves
and others; learning about the nature of our consciousness and how it relates to the outer world;
expending our mind; getting involved in good causes – those are all far more greater purposes
than the mere act of chasing wealth like a Scrooge. Wealth – bigger houses, faster cars, trendier
clothes, fancier technology – promises happiness, but never delivers. Instead, it results in a
craving for more, and this slowly robs us of life. It consumes our limited resources. When you
catch yourself thinking or indulging over the thought of money, snap out of it. Feel your breath
and come back to the present. Be, because you enjoy being; trade, because you enjoy trading;
live, because you enjoy living; learn, because you enjoy learning – that is the secret to true
prosperity!

Attachment to fear
I was never really interested in school. Right from a young age, I never felt my place was in
school studying things I had no interest in learning. I was more of a dreamer and a free spirit than
anything. I wanted the freedom to do what I loved doing, that is, arts and sports; however,
everyone around me was telling me that my future depended on how well I did at school. “If you
do well you will have a wonderful life, if you fail you will be miserable for the rest of your life.”
That was the “doxa”. So early on I started stressing about my future because obviously I didn’t
want my life to be miserable. But at the same time I didn’t like school. I developed a fear of the
future that stuck with me for a good portion of my adult life. That fear of the future prevented me
from stepping outside of my comfort zone and became deeply engrained in me – so much that
when I finally broke free of it, my whole vision of the world changed. As if, all my life I had this
self-made wall in front of me that prevented me from seeing beyond it. When this illusory wall
finally came down, I was able to see myself as I am; I was able to see things for what they were,
and the world for what it is. I was liberated!
To explore the nature of fear, it is best for me to tell you a story. There was once a town where
the thing everyone feared the most was getting lost at night in the "Cave of Fear". No one had
ever returned from there, and whenever anyone got lost and ended up there, the last thing that
was heard was a great cry of terror, followed by a few enormous guffaws. The townsfolk lived in
a perpetual agonizing terror that one day the monster would leave the cave. So they regularly left
gifts and food at the mouth of the cave, and these always soon disappeared. One day, a young
man came to town, and, as he heard about the situation with the cave, he thought that it was
unfair. So he decided to enter the cave and confront the monster. The young man asked for some
help, but everyone was so afraid that not a single person approached the mouth of the cave with
him. He went inside, finding his way with a torch, and calling out to the monster, wanting to talk
with it and discuss the situation. At first, the monster had a good long laugh, and the young man
followed the sound of the monster's voice. But then the monster went quiet, and the young man
had to carry on, not knowing in which direction to go. Finally he arrived at a huge cavern. At the
bottom of the cavern he thought he could make out the figure of the monster, and as he
approached it, he felt that something hit him hard on his back. This pushed him forward towards
a hole in the rock. He couldn't avoid it, and fell through. Believing that he was about to die, he let
out one last cry. Then he heard the great guffaws. "That is it for me," he said, whilst falling.
However, as he fell, he heard music, and voices. They got clearer, and when he made a soft
landing at the bottom, he heard a group of people shout: "Surprise!!" Hardly believing it, he
found himself right in the middle of a big party. The partygoers were all those people who had
never returned to the town. They explained to him that this place had been the idea of an old
mayor of the town. That mayor had tried to accomplish great things, but was always held back
by the fears of the people around him. So the mayor invented the story of the monster to
demonstrate to people how such an attitude was so limiting. So the young man stayed there,
enjoying the party and the company of all those who had dared to approach the cave. In the town
they still believe that to enter the Cave of Fear is the worst of all punishments, so they stayed in
their ignorance and fear.
As we can see the story described the nature of fear and its antidote. Fear is the attachment to an
unfavorable outcome that could happen in the future. There is always that possibility; however,
there is also the possibility that it doesn’t happen. Anything could happen in the future; but,
when we think of something negative, we tend to bring about that negative outcome because we
make it happen by overly thinking about it. When you challenge yourself by stepping out of your
comfort zone, you not only free yourself of fear but you also discover its nature. For instance,
when you were learning to ride your bicycle for the first time, you probably kept falling. You
probably never realized why it kept happening, and it’s only now when you look back at yourself
that you realize that you were holding onto those handle bars with so much fear that your
knuckles went wet. You were so afraid of falling off that your body was a stiff like a plank. You
were holding too tight in such a way that whenever the bike moved to the right you weren’t able
to compensate. Your body was too stiff to bend and to accommodate, which is why you kept
falling off. It’s only later on when you were able to relax that you found that you were able to
stay on that bicycle with more ease. In fact, when you really relaxed, you didn’t fall off at all.
This shows us that fear is the reason why we keep attracting bad things in our lives. It is the
reason why we never advantage of opportunities. That happens to us all the time in trading.
When we fear an outcome, this brings a negative state of mind which creates the karma which
causes that outcome to actually come. Furthermore, we are unable to take advantage of the
constant opportunities the markets make available to us on a moment-to-moment basis. In other
words, there is a lack of trust in our methodology. We fear that the market is going to harm us, so
we don’t trust; and because we don’t trust we cause the very thing that we fear to happen. It is a
self-fulfilling prophecy. When you are afraid that you are going to do something wrong your
mind starts overthinking and you tense up. You just cannot perform well under such conditions –
and you end up doing something wrong. Conversely, when you relax, you tend to think more
about what you are doing in the present – not what might happen in the future. As a result, things
tend to flow quite smoothly.
When we free our mind of the limitations of fear and ignorance, we are able to relax and
maintain equanimity. Being fearless encompasses a deep understanding that failure does not
exist! This is very important because if you believe deep down inside that there is no such things
as failures and mistakes, you won’t be experiencing the constant swirls of “what ifs” in your
mind. Being fearless also encompasses the understanding that, while pain is inevitable in life,
suffering is optional. All of us have experienced pain and suffering to various degrees. For some,
the pain is such that they think that the only way to protect themselves from suffering again in
the future is to control what is outside of them. So they become control freaks trying to control
the world (the markets, people, things, circumstances, etc.) so as to make it fit what is inside of
them – their beliefs, thoughts and emotions. This is a losing battle because there are many things
we have no possible control over. Instead, we should strive to act on things that we do have
control over. Change must come from within so that we can bend with the wind and flow with
the way things are – transient, ever-changing, uncertain. The craving for control stems from our
pain. It is the clinging to the fear that this pain might happen again in the future, and it is that
specific clinging that creates suffering. Releasing ourselves from any clinging is the end of
duality – right or wrong, good or bad, etc. Every time you decide to do something you are simply
and just in the moment. Nothing else goes through your mind. At this point, you understand
more the role of mindfulness and meditation. You finally see that it is about letting go of things.
It is about not exerting (or trying to) control. There is no thinking – you are just here perfectly at
peace with everything.

Attachment to pain
All too often, we –traders – allow our mental state to fluctuate with the markets. We associate
what is happening to us in the present to memories of when similar conditions happened in the
past. If those situations made us feel a certain way at that moment, we automatically enter the
same mindset in the present. In the 1987 documentary, The Trader, Paul Tudor Jones is shown
screaming, swearing, biting his nails, shaking his hands, tapping his feet and doing anything you
can imagine a nervous person doing. This shows us that this kind of mental association happens
to anyone regardless of level of expertise. If only we could flip a switch at the very instant this
occurs, and turn off the suffering. Well, that switch exists. It’s called Letting go! You would
probably say, “Well yeah, but that’s the problem, letting go in the midst of the moment is not
easy.” To this I can only say this: Pain is embedded in the very fabric of our existence – it is
inevitable; however, suffering is a choice. Suffering occurs when our mind is constantly dragged
out of the present to indulge in clinging. The markets are a metaphorical mirror that reflects to us
what is inside of us in terms of thoughts, beliefs, and emotions, so any negativity that we hold
onto will have an impact on our ability to think and perform properly. This is so because
everything that happens in our mental environment feed on each other. Our thoughts feed on our
beliefs; our emotions feed on our thoughts, and all of this demand physical expression, thus,
translating into actions14. Therefore, I strongly urge you to find the courage to release yourself of
any clinging so that you can free yourself from suffering. This will not only lead you to a more
consistent and pleasurable trading experience but also to a more happy and satisfying life.
Conquering ourselves, however difficult it is, has the potential to ignite something very powerful
in us. In the ash of pain a phoenix can be born. Equanimity helps us look deeply into the
difficulty and the pain we have so that we can become the phoenix. Please note that when I say
“conquering” I do not mean that you have to fight with yourself. Fighting ourselves to obtain the
results we want does not work. It is counter-productive to do so and can only lead to results that
are contrary to what is expected. On the other hand, accepting what is inside of us as thoughts
and feelings; watching them arise and fade is the only way to disarm those mental occurrences.
Watching for the mere sake of watching without evaluating, trying to fix, or push away – this is
the essence of equanimity. When you acquire equanimity as a skill, you learn to be in harmony
with every sensory experience (sight, sound, touch and mental feelings) while not holding on to
them.
Being in harmony with our senses brings us to a place of openness. This openness allows us to
challenge what we think we know about the nature of our reality. It allows us to better appreciate
the complexity of each and every moment. This openness makes it clear to us that there is no
way our mind is possibly representing the whole spectrum of information that is available for us
to perceive in any given situation or circumstance, at any given moment. For us to have
knowledge of the whole spectrum of information that can be available at any given time we
would have to be omnipresent, omnipotent and omniscient. I think the best way to communicate
this is by analogy. Consider that Joe just had an argument with a work colleague. As a result he
cannot stand her anymore, and this is affecting his work environment. Now, consider that this
colleague has a range of expressions. Everyone has. All our inherent qualities, characteristics,
memories and experiences can be described in some sort of finite way. Now, do you think Joe’s
representation of that colleague (in his mind) is actually her? In other words, is it who she really
is? No, it can’t be. Because for Joe to know her as who she really is, in all her wholeness, he
would have to know her as her consciousness. He would literally have to be her and every aspect
and component part of who she is. Therefore, any way that he is representing her is, in actual
fact, less than who she is. Anyone that we can think of is just some limited version of who they
are. Based on those premises, we have no other way than to assume that Joe’s representation of
that colleague is a component part of his identity.
Think about it for a second – other colleagues definitely have their own mental representation of
that person, don’t they? They may have similarities to Joe’s but his representation is unique. It
exists in no other places in the universe other than in his mind. The problem that we all have is
that, we have this tendency to think that our representation of another person is actually that
person when in fact the only place where that representation exists is in our mind. Again it is
really part of our identity. It is not that colleague as she is, it is Joe! We can’t perceive in other
people what is not inside of ourselves in the first place. It is impossible; otherwise, that
characteristic or trait that may exist in them would have been invisible to us. Therefore, it has to
be inside of us so that it can exert a force on our senses in order for us to recognize it and label it.
Then, if that representation is composed of negative mental energy (anger, confusion, frustration,
fear, etc.) then it is having a negative effect on our lives, and we are the ones who are going to be
suffering.
Everyone gets hurt emotionally at certain points in their lives. None of us evolve in this world
pain-free. And the problem is that if we don’t truly settle or resolve our pain it will turn into
suffering. That suffering will then keep affecting our lives on a conscious level first and
foremost, but also in subliminal ways. On a conscious level, we might find ourselves being
constantly on edge, stressed, pessimistic, and so on. On an unconscious level, we could develop
some very damaging behaviors. We might unconsciously sabotage our trading results, and we
might not even know why this is happening. Furthermore, we will pass this suffering onto our
children. We have no other choice, it is going to happen. As much as we want to try not to, and
be conscious of it, unless we have a way to address our suffering, it will get passed on. Then our
children will pass it on to their children, and it will keep on getting passed on until somebody
decides to break the cycle. This is not taken out of a science fiction novel. That is how life cycles
are perpetuated sometimes over hundreds of years. Everything is inter-connected, and whether
we understand it or not, everything has a cause and effect. We like to think that time heals
emotional wounds, because most of the time after years of holding onto suffering, we
inadvertently built a system of beliefs as an attempt to shield ourselves from those wounds.
However, the pain is still there inside of us. Suffering cannot go away unless we learn to release
ourselves from it.
Personally, I strongly believe that if we weren’t meant to keep on growing mentally, then we
wouldn’t have been gifted with the ability to think, reason, and create. Implied within our ability
to think, reason, and create is the inherent capability to learn our way out of the painful
situations. In other words, we have the capability to heal our emotional wounds so that we can
perceive what is available from the world beyond our pain and sufferings. The world will always
offer us an opportunity for love, harmony, happiness, and success. It will also offer us despair,
disappointment, anger, hate, and betrayal. What we end up with from each of these moments has
to be a direct reflection of what is inside of us because the world and everything that it
encompasses does not interpret the information it has to offer in any given moment. That process
happens exclusively in each and every one of us through our filters (i.e., beliefs). Therefore,
consider that the idea of letting go of mental pain is that you are doing so because any negative
energy inside of us has the potential to express itself in negative ways; not only in the way we
see and experience the markets, the world, our lives, but also the effects it has on our own
physiology. This is so because the fundamental truth about beliefs is that they ask for expression.
They will express themselves however they can. We don’t have to passively let our trading (and
our lives) be affected in detrimental ways because of the negative energy that lingers in us. By
embracing non-attachment, we can also embrace acceptance, peace, gratitude, prosperity and joy,
leading us down the path of physical, emotional, and spiritual wellbeing.
In conclusion, when we acknowledge and fully embrace our present reality, where we are, who
we are, what we are doing, what we’ve got – when we are grateful for all that is and grateful for
being – it releases us from the mental blockage that prevents us from experiencing success.
When we relax into the truth of the transiency of everything, we naturally dissociate our self
from the essence of who we are. Since everything is in constant motion, we understand that the
only promise attachment has to offer is that of suffering. Paradoxically, when we transcend the
boundaries of attachment we free our mind from any limits – and this is when money makes
itself available to us.

QUESTIONS
What are the mental occurrences and feelings you experience when you spot an opportunity in
the markets; when you are in the process of entering a trade; during the time that trade is on;
when you exit the trade? Elaborate on each and every one of them without judging or weighing –
just write what comes out of your mind without censoring anything.
Are your expectations in line with what the markets can realistically make available to you based
on the opportunities your methodology can identify?
What are the things you cling on to? Why are you attached to these things?
I would like to invite you to reflect on a quality (or more) of yours that you think is a good
reflection of what gives you an edge in the markets. I would like you to also think about that
part of you that tends to get you into trouble in the markets.

What I hopefully made clear so far is that market analysis is just a piece of the trading equation.
If you ignore self-analysis, you are missing the whole picture. Without self-analysis, we cannot
see things objectively. We cannot see the way they truly are, and at this point trading is just an
incessant act of projecting our own problems onto the markets. At the very core, our resistance
to change is the cause of all of our woes whether they happen in the markets or in the outer
world. Resistance is experienced when there is clinging which is deeply rooted in ignorance.
Everything we have discussed so far has led us to this very conclusion.
Our attachment to things, ideas, people, events, outcomes, emotions, ourselves, and our lives
brings suffering. This is one of the fundamental truths of living. The Buddha realized this about
2500 years ago and made it the second of his Four Noble Truths. The First Noble Truth being
that life is suffering. Because everything that is is impermanent, happiness is by default transient
as well. Therefore, clinging to anything will only provide a temporary and fading sense of
security; after which suffering will arise. However, the discovery and the acceptance of this
truth also lead to its solution which is found in the Third Noble Truth. The Third Noble Truth
states that suffering can be overcome and true happiness attained. This is perhaps the most
important of the Four Noble Truths because in it the Buddha reassures us that true happiness
and contentment are possible. When we give up useless craving and learn to live each day at a
time, enjoying without restlessly clinging to the experiences that life offers us, then we become
happy. We are released from the narrow limits of self-interest. We become free! And this leads us
to the Fourth Noble Truth which states that we can end suffering namely by following the
eightfold path which encompasses behaving decently, not acting on impulses, and practicing
mindfulness and meditation.
Siddhārtha Gautama (the Buddha) wasn’t some kind of deity or superhuman, although a lot of
the beliefs attribute to him superpowers or a deistic nature. What most scholars agree upon is
that he was just a human being who went on a quest to find the meaning of suffering. After trial
and error he finally vowed to sit under a Pippal tree in a complete, extensive, and intense
meditative state until he found that which he went on to seek. In the end, the answers came to
him through enlightment. This ability to find our purpose and to awaken is present within each
and every one of us provided we are ready for it. Awakening is very important, especially for us
traders because it is the self and all its cravings that prevents us from seeing the markets as they
are. It prevents us from getting the answers we seek. These answers are within us; however, how
can we see what is – and was always – within of us if we constantly have blinders that obstruct
our vision? These blinders are our filters through which we see the markets, and depending on
how closed they are, they can severely affect the way we see not only the markets but also the
world. Finding our answers – to our trading misfortunes, our unhappiness, and so on - requires
an openness to challenge what we think we already know. If we aren't willing to acknowledge
that in any given situation more information and choices exist than what our beliefs allow us to
perceive, then we will never learn to recognize or anticipate the existence of these other more
satisfying possibilities. By acknowledging the possibility that other more satisfying realities exist,
we open ourselves up to perceive and learn the steps that can result in greater levels of
satisfaction. Refusing to acknowledge the existence of these possibilities would be the same as
claiming that the earth is flat before it was discovered as not being so. When we continually
argue for the status quo by defending what we already believe we know, the markets (and life)
will seem to be constantly assaulting us.
CHAPTER 4
WHERE EXPERTISE BEGINS
“You will never change your life until you change something you do daily.” Mike Murdock

In this chapter, I will attempt to lay the foundation for the cultivation of your
equanimity in the midst of the omnipresent uncertainty that reigns in the marketplace. I will also
share my complete set of rituals that helps me in my quest for optimal performance on a daily
basis. You are free to implement those rituals to help you acquire more consistency in your
trading. However, you should understand that what works for me might not work for you. We
are all different and the goal here isn’t to blindly mimic what I outlined but to find something
that works for you. For example, I state Zazen as the type of meditation that works for me. You
might find that this type of meditation doesn’t work for you. You might be inclined to doing
something else. You can make your rituals as hard or as easy; as long or as short as you want to,
but a general rule of thumb is to keep everything as simple as possible when you are in the
process of figuring out what works for you as a ritual. This is so because you don’t want to
engage in extensive and time-consuming rituals that require you to display an enormous amount
of self-control. [Note: I am using the word “self-control” when the term “will-power” would
have been more appropriate here. They both are the same thing but somewhere along the line the
word “self-control” became obsolete and we started calling it “willpower”. The term “self-
control”, though, shows the connection to the self. That is the key and it is the reason why I
prefer that term]. Our ability to use self-control to our advantage oscillates from low to high on a
continuous basis. It does so because of many different factors such as hunger, changes in mood,
and other external factors. Hence, thinking that you will be able to stick to strenuous rituals is a
fallacy. This might work for a week of two, but it is not sustainable over the long haul.
It is incredibly easy to get caught up in the desire to make massive changes in your life and
ultimately not being able to stick with them. Therefore, it is important to remember that lasting
change is a product of daily habits. When you finally decide to start the changes that will bring
you the trading results you desire, one thing I cannot emphasize enough on is to start small. As
the great Bruce Lee once said, “long term consistency trumps short term intensity.” These few
words in and of themselves are full of wisdom. Bruce Lee understood the importance of sticking
to rituals for they are the stepping stones on the path to success – whatever success means to you.
If your rituals are too intensive right out of the gate, you won’t be able to stick to them. That is
why it is so important to start slow and build the level of intensity gradually over time. A mere
act of brushing our teeth, for example, hardly requires any self-control at all because the task is
so small that we don’t even have to think about it. However, such a small ritual, done
methodically every single day has some very good longer term benefits. Regardless of what we
might want to start as a ritual to help us reach our long-term trading goals what matters is that we
become the type of person who always sticks to his new ritual. No matter how insignificant that
new ritual may seem, small rituals can have huge impacts. Of course, then if it is that small and
easy, we can definitely build up the level of performance that we want once the behavior
becomes consistent and an intricate part of who we are. When do we know we have reached that
point? Performing the ritual day in and day out barely requires any self-control. It is easy as
breathing. When you get there, only then can you build the level of performance. Back to the
teeth brushing example, if you have made it a habit to brush your teeth once a day for 1 minute,
building the level of performance would be that you could start by doing it twice a day for one
minute. Then you could move on to doing it for two minutes, twice a day. After that, who knows,
flossing might be the next step in your regiment. You get the point.
Having attended several meditation retreats throughout the years I have seen first-hand how a
particular set of simple but powerful rituals can impact lives. Zen monks have rituals for many
things they do, from eating to cleaning to sitting and walking meditation. Ritual gives something
a sense of importance — if it is important enough to have a ritual, it is important enough to be
given your entire attention, and to be done slowly and correctly. Zen monks adhere to their
rituals methodically, with awareness of every moment, such that they are completely absorbed
by what they are currently doing. There is symbolism involved in each ritual, and a real sense of
purpose. You don’t have to learn how to do everything exactly the Zen monk way. Just make it
an intention to be – and stay – as present as possible whenever you are engaging in a ritual. I
remember one of my teachers once said that the act of repeating a certain number of rituals over
and over again without thinking about what you feel like doing or don’t feel like doing, what you
ate last night or what you’re going to do tomorrow, will bring a sense of clarity to what you are
currently doing right now. In other words, we are surrendering to the fact that there is a way to
find that which we are looking for. The more we are willing to give ourselves whole-heartedly to
that way, the more we are actually giving ourselves to ourselves. The stakes are very high. Since
rituals are tasks that facilitate the achievement of our goals, if we are able to actually do the
things we ought to do by being completely immersed body and mind into it, then there is nothing
preventing us from reaching a point where our original goal (or outcome) doesn’t matter
anymore. The rituals (or the process) become the actual goal. Instead of feeling like every daily
activity is something that “just needs to get done,” our rituals become activities that we feel serve
a positive function in our lives, and they become something we even enjoy doing and look
forward to. In other words, we find liberation, contentment and joy along the way.
When we stop worrying about our goals, everything takes care of itself. We become the type of
person who can achieve the things that we want to achieve because we intimately know that
there is a way to get there. It is not an abstract thought anymore. We know there is a process to
follow, so we give ourselves to that process. People often set their sights on an unrealistic
overnight success or transformation they want to achieve. This is a big mistake. If we don’t
maintain a level of consistency in what we do, we will never be able to make the progress and
achieve the results we desire. This is why so many successful traders talk about the importance
of consistency in their approach – whether it is in regards to the application of their trading
methodology or in the work they do prior and after any trades – as that has often made all the
difference in their results. One thing to note, though, is that having big dreams isn't about you
sprinting as fast as you can towards the finish line. It could but please, for your own sake, don’t
make it that way. What is the point of rushing, only to collapse once you have reached your
goal? Instead, make it about the journey. What counts is the mental fortitude to do a little bit
each day until you get to where you want to be, one step at a time. At first, those small steps
might be so small and insignificant that you might even think that they don't even matter.
However, when you add up these steps over time, day after day, month after month, and year
after year, you create an avalanche of positive outcomes. This pushes you beyond your own
expectations – it pushes you towards achieving the goals you set for yourself in a more relaxed
and healthy way.
THE IMPORTANCE OF RITUALS
”Every time we participate in a ritual, we are expressing our beliefs, either verbally or more implicitly.” Tony Schwartz

One of the greatest obstacles to trading success is our own inconsistencies. Hence, rituals help us
organize our time so that we can efficiently focus on the process of acquiring the trading skills
and domain knowledge we discussed about in the previous chapters. I use the word “ritual”
instead of “routine” because I believe that even though there is no difference in the action itself,
there is a profound difference in the intention – or the attitude – behind the action. To many a
routine is a mindless chore that is not a meaningful part of our day, but it needs to be done so we
do it. I like to think that rituals are a bit more than that. I view them as more meaningful practices
where we are actually fully present in the moment and fully engaged. The fundamental value of
rituals is that they ensure total preparation. Therefore, you should set up a set of rituals that allow
you to direct your focus of attention one small step at a time on tasks which consists of:
• Learning about the market’s behavior
• Learning about your own behavior
• Learning to execute properly without mistakes or trading errors on every single trade
The ability to sustain and cultivate an optimal state of mind is the very core of any trading
success in the first place, and the goal of a good trader is to build good habits which ultimately
breed consistent results. Consistent results, whether in your trading results or in any other areas
of your life is a function of a process-based approach which can be broken down into small and
manageable daily tasks.
Below is an example of how my daily schedule is currently organized. The time allotted per
rituals is more or less accurate. I don’t fret over a few minutes lost here and there, but I do make
sure that I get everything done the same day. Great achievers are successful in what they do
because they have established habits which unsuccessful people are unwilling or unable to
develop. Good habits are the key. They are hard to get and easy to lose. Bad habits are easy to
get and hard to lose.
Since I travel a lot my time zone is always changing, so I am always altering my schedule to fit
the opening and closing of the U.S stock market. For simplicity’s sake the schedule laid out here
is Pacific Standard Time.

Monday to Friday
• 5:30 a.m - 5:50 a.m
I wake up at 5:30 sharp, I stretch, then I take a sip of water. Afterwards I will read my
affirmations
• 5:50 a.m - 6:30 a.m
By that time I’m having breakfast while glancing over market related news
• 6:30 a.m
Market opens. I am watching how price action unfolds
• 8:00 a.m
I’m usually done watching the markets. I am out of any day-trades I took during the opening
hour. I also placed my orders to open any new swing-trades and placed my orders to close any
existing ones (if any)
• 8:00 a.m - 8:15 a.m
I read trading blogs
• 8:45 a.m - 11:30 a.m
I’m usually out during that time period for a run, followed by an hour of yoga session. If I have
the time I will put a 20 minutes meditation in there
• 12:30 a.m - 1:00 p.m
I am back in front of the screens and I am getting ready to watch the market close. I will often
open new positions or close existing ones closer to the market close
• 1:00 p.m - 2:00 p.m
I update my trading journal and my trading log. I also save the charts of the set-ups I took or
exited for later review
• 2:00 p.m - 3:30 p.m
Research and homework for the next trading day ( I scan through hundreds of charts noting
possible entries, exits, position sizing, and risk management parameters to minimize decisions
during market hours)
• 9:30 p.m - 10:00 p.m
I read a book. The only books I read are trading-related, or self-improvement-related. I will
typically read one chapter per day so this might take more or less time depending on the length
of the chapter
• 10:00 p.m - 10:20 p.m
Sitting meditation (zazen)

Saturday
• The first thing I do when I wake up is sitting meditation. Then Saturdays are usually
days where I allow some form of creative expression in the way I approach the rest of my day. I
usually spend most of the day with myself or with loved ones

• 9:30 p.m - 10:00 p.m

Reading - one chapter as usual

Sunday
• I start the day with sitting meditation

• 1:00 p.m - 2:30 p.m

I will read my journal, logs and saved charts. The goal is to learn something new about the
market’s behavior but also mine – what I did right, what I did wrong and where I could have
done better
• 2:30 p.m – 4:00 p.m
Back-testing and research

In the following sections I will elaborate a little bit more on some of the individual rituals you
see on the schedule – i.e., the self-affirmation technique I use, the kind of sitting meditation I do,
and so on. But for now, as you can see I have something planned every day of the week, with the
exception of Saturday. This prevents me from having to think about something to do. When we
leave our mind the choice to choose what to do, guess what? It is going to have a tendency to
procrastinate. When the plan is already laid out, there is no place for decisions, dilemmas, or
even thinking for that matter. All you have to do is show up every day. One thing I want to point
out is that my schedule has evolved over time to fit my needs at the moment. You should expect
yours to do the same. Test, tweak and eventually find something that suits you best, but be strict
about the rituals. Once you have set up a task to do as part of your rituals, try your best to stick to
it and be done with it within the set time frame. In the end, sticking to rituals is just a function of
your desire. How much do you really want that trading success? Close your eyes and take a deep
breath before answering this question. Seek within yourself. Look beyond your fears – in the
deepest part of your unconscious mind you will find the truth. The unconscious mind never lies!
If you find that the answer is a resounding “A hell of a lot”, then commit to it. There is no free
lunch – you have to do the work. When you make a commitment to your true self, you have to
stick to it. If you do stick to it no matter how hard it is, you will acknowledge and honor your
true self. Doing so, profoundly changes something in you. The caterpillar finally becomes the
butterfly.
DAILY AFFIRMATIONS
“Change is from inner to outer – We start by dissolving our attitude, not by altering outer conditions” Bruce Lee

Our lives are pretty much self-fulfilling prophecies. When we deeply believe in something our
behavior is usually aligned with that belief. So, every time we tell ourselves “I can’t”, we are
creating a feedback loop that is a reminder of our limitations – and our behavior generally
follows. Similarly, if we tell ourselves “I can”, our behavior usually goes in line with such a
statement. An affirmation, therefore, is defined as the assertion that something exists or is true.
An emerging set of published studies15 suggest that a brief self-affirmation activity during the
day can boost the physical and emotional wellbeing of a person. It can also protect against the
damaging effects of stress on problem-solving performance, hence, accelerating one’s ability to
achieve his goals. Napoleon Hill, one of the earliest producers of modern genre personal-success
literature, interviewed many of the most successful people of his time – Thomas Edison, Henry
Ford, and so on – and the one thing that they all seemed to have in common was that they acted
as if what they desired most already existed before they had it. This was the core philosophy of
Hill’s work, and it is a good representation of the role affirmations plays in long-term success in
any field.
By stating affirmations to yourself in a mantra-like fashion and repeatedly over weeks, months
and years your mind becomes trained to think in a different way. If you don’t think this works
think about your fears for a moment. For example, if you are afraid of spiders, you are literally
using affirmations and visualization to train your mind to produce a state of panic whenever your
see one. This also works in reverse – people who are confident have affirmed, at every
opportunity, to themselves that they are confident in every situation, whether they did it
consciously or not. We all use affirmations in our lives without even knowing that we do, so why
not put affirmations to good use and consciously train your brain to a better way of thinking.
Below is an example of 8 statements for mental reprogramming that you can implement as part
of your daily rituals. You should read them out loud to yourself every morning, preferably before
engaging in any trading activity. Doing this on a daily basis will contribute to keeping you
positively focused on the process of practicing proper trading habits.
Statements
1. I objectively define my edge in the market
2. I act upon my edge without hesitation, doubts or fears
3. I pre-define my risk on every trade I place. I completely accept that risk and I am willing to
completely let go of that trade once it’s on
4. I continuously monitor my susceptibility to making errors by keeping detailed logs for every
trade I place
5. I have completely relaxed self-assurance. I am sure of myself in all situations
6. Markets are uncertain and I am at peace with it. I accept the losses it hands me with gratitude
for they are learning experiences. I also accept the wins with gratitude, however I let go of all of
these outcomes.
7. I know when I am prone to making trading errors and I am aware of the mental occurrences
happening within me at that time. I feel them; I breathe into my lower abdomen and I watch them
pass. This allows me to regain objectivity.
8. I am easily able to relax as deeply as I wish at any time. I use this ability to conserve my
energy.

I suggest these 4 steps to get the most out of these affirmations:

1. Write out/ print the affirmations, and keep them on your trading desk so that they are within
sight.
2. Never start your trading day without those affirmations. A positive mindset + a positive
expectancy methodology= success
3. Some days you won’t be in the mood for reading the affirmations. Read them anyways – that
is when you need them the most. The fact that you’re doing what needs to be done, instead of
doing what is easy will assert something within you. You will be telling to your subconscious,
“No, I really want this. I am committed to making trading success a reality for me.”
4. Once or twice a week, sit down and write out the affirmations that are specifically hard for you
to implement. Writing them down will help consolidate them inside your mind.

Feel free to retract or change some of those statements so that they can better fit where you are
heading in your trading journey. You can add statements that cover other areas of your life as
well. They all don’t have to be specifically trading-related. For example, when I feel low on a
certain day for x number of reasons, I take a deep breath and I affirm the following to myself: “I
am so grateful for my life. I am grateful for having been granted the opportunity to experience
life, with its ups and downs. I am grateful for all the range of emotions I feel, joy, sadness, hope,
despair, etc.” This affirmation has such a powerful effect on me that the mere thought of it, an
intense feeling of gratitude, courage, joy, and hope emerges within me. So play with it and see
what affirmations work for you. One thing to keep in mind, though, is to keep your new
statements positive and in the present tense. Every negative thoughts or words are considered as
negative affirmations and these can be even more powerful than positive affirmations because for
some reasons we often find them easier to accept. The brain doesn’t seem to automatically
process negative languages. Any statements that include the word “don’t” or prefixes such as
“un” or “non” are initially (subconsciously) processed in the positive. If I tell you not to think
about a pink elephant for example, you automatically think about it even though I specifically
asked you not to. This is why we should avoid using statements in the negative. Rather than
focusing on an outcome that is not desired, focus on what is desired.
Your subconscious mind is listening to everything that you say to yourself, and it doesn’t have a
filter. It will take in everything that you say, and over time, unconditionally accept the most
consistent messages as reality – whether this is actually true or not. It doesn’t matter if you are
only kidding, or don’t truly believe the things you say to yourself. Your subconscious doesn’t
have a sense of humor, and it is completely literal, therefore, start making yourself more aware of
your self-talk.
MEDITATION
“All of humanity's problems stem from man's inability to sit quietly in a room alone” Blaise Pascal

One day I was walking down the streets in the suburbs of Seattle. I saw a little boy with a red
plastic bag attached to his neck. The plastic bag was cut in a way that it resembled a cape. On the
little boy’s t-shirt there was a superman symbol – which I’m assuming he must have drawn
himself. He was there playing on his own, completely immersed in his own world while his dad
was cutting the grass. He was so happy, so full of joy, so full of life. No worries, no cares, no
limits, no nothing. He could fly. We’ve all experienced that when we were kids. We could be
whatever we wanted to be. We could do whatever we wanted to do. In an instant we could find
ourselves in the vast savannas of Africa, or on a space cruise, without ever leaving the comfort of
our room. It’s an amazing feeling. We come to this world free of worries, boundaries, self-
limiting beliefs, and so on. Everything we envision we have. We are able to make all of our
dreams come true. I remember when I was a kid, I desperately wanted this brand new slot-car
racing toy, but I never got it. I ended up drawing the circuit on a piece of paper. I used rocks as a
substitution for cars and for me that was the real thing. I had the game I wanted, and I was
happy! Literally, we are limitless; however, as we get older and older we get influenced by the
world. We are told what to do and how to behave. Our urge to conform makes us lose our wings
and our imagination. We give up on our dreams and aspirations so that we can “fit in” better. As
time goes by, we stop listening to our own heart and intuition. We start giving an enormous
amount of attention to the noise outside of ourselves, so much that it drowns our inner self. We
forget about our greatness, we lose our adaptability and eventually we forget about ourselves.
We forget who we really are, and we start living a life that is not ours. We live a life that has no
true meaning to us and we believe that this is the way things should be.
Many of us experience a profound sense of disconnection – we feel disconnected from our true
essence, our core, our true self. This can come from many sources—like distracting ourselves
with sex/drugs/alcohol, the busy-ness that comes with actively engaging with the markets,
staying in an unsatisfying relationship, or for some being stuck in a dead-end job. Whatever the
source, the outcome is always the same: we feel lost, out of touch, short on substance. Like a
hamster in a wheel, we go through the daily routines of our lives, while something deep inside
longs for more. We sense that we have a purpose—we can almost touch it right in front of us—
but it remains elusive, just out of reach. I have experienced this sense of disconnection many
times in my life, sometimes on a daily basis. The good news is that no matter how far we have
strayed from our deeper self or how lost we are, we can always return home.
The habit of meditation is one of the most powerful things I have ever learned. Once I discovered
it, my whole life – my perspective of it – started shifting right before my eyes. The "point" of
meditation isn't to get rid of your mental clutter — but to get really familiar with it. Then, over
time, be able to let go of concepts of duality, past, future, and other distracting thoughts. The
only thing that remains is the present. Even if only for a short instance – time flies, ego vanishes,
and all aspects of awareness go through the roof. In a sense, the feeling I get from it is that I am
returning home to my true-self16 and I gain a real sense of appreciation for my whole existence.
What boggles my mind is how such a simple, yet profound exercise can transform us in ways
most will never even think are possible.
In the Buddhist belief system, the Buddha is said to have attained enlightment under the Bodhi
Tree where he had been sitting in a meditative state for weeks. It is said that soon after his
enlightenment he passed a man on the road who was struck by his extraordinary radiance and
peaceful presence. The man stopped and asked: “You seem very special. What are you? Are you
some kind of an angel?” “No,” the Buddha replied. “Well, are you some kind of god then? You
seem un-human.” “No,” he said. “Well, are you some kind of wizard or magician?” “No,” he
replied. “Well, are you a man?” “No.” “Then what are you?” At this the Buddha answered, “I
am awake.” In those three words – “I am awake” – he gave the whole of Buddhist teachings.
The word “Buddha” means one who is awake. To be a Buddha is to be one who has awakened to
the nature of life and death, and in essence freeing his mind in the midst of this world. The
practice of meditation does not ask us to become a Buddhist or a religious person. It invites us to
fulfill the capacity we each have as humans to awaken. Therefore, in that respect, meditation is
simply brain exercises. It comes from a 2,500 year old tradition of using an anchor like the
breath to stabilize attention and bring awareness to the present moment. This is achieved by an
experience I call “the disengagement of the self.” The identification of a self as being separate
from everything else is a fallacy in and of itself. It is an illusion that consists of the belief that
there is an "I" that is not part of anything else. On this basis we think, "I am one and unique.
Everything else is not me. It is something different." From this identification of the self stems our
dualistic views on everything. Since there is an "I," there are also "others." As soon as this split is
made, it creates separation. It creates two opposite ways of reaction: "This is nice, I want it!";
"This is not nice, I do not want it!" “This is good”; “This is bad!”
Meditation helps to close our perception of duality – even if it’s only for a short moment. It helps
in restoring our awareness of the present by making it clear to us that there is no good or bad.
What is, just is. We are the ones who put context behind our experiences through our set of
filters. An experience is just an experience, and we can learn to appreciate it as it is. Meditation
also helps us see that we are not just a consciousness in a body: we are the body. The sense of
being an ego, an “I”, and a passenger of the vehicle of the body is merely an illusion. That sense
of being a subject, a locus of consciousness inside the head makes no neuro-anatomical sense17.
There is no place in the brain where an ego would be hiding. Everything we experience: our
consciousness, our emotions, thoughts, moods, and the impulses that initiate behavior – all of
these things are delivered by a myriad of different processes in the brain that are spread out over
the whole of the brain. It is possible to lose this feeling or sense of “self” that is the center of
experience. For thousands of years people have claimed that they were able to do so through
meditation. Rather than having the experience of watching over your shoulder and being separate
from your experiences but at the same time appropriating the experiences, you can just be
identical to the experience. This is classically described as self-transcendence. While this doesn’t
tell us anything about the nature of the universe nor does it make any religious dogma any more
plausible, it does tell us something about the nature of human consciousness. We are lost in
thoughts 99% of the time, and much of this thinking is what makes us unhappy. Therefore, if we
lose our sense of self, by default our mind calms down and the thinking diminishes – it can even
stop for a few moments. Our experience of the world then becomes more accurate or more
faithful to the way things really are.
In addition to allowing us to experience the world in an undistorted way, meditation has several
other benefits. Jonathan Haidt (researcher, psychologist and professor at the University of
Virginia) is one of the world’s leading thinkers in positive psychology. In his book called, The
happiness Hypothesis18, he explains the following:
“Suppose you read about a pill that you could take once a day to reduce anxiety and increase your contentment. Would you take
it? Suppose further that the pill has a great variety of side effects, all of them good: increased self-esteem, empathy, and trust; it
even improves memory. Suppose, finally, that the pill is all natural and costs nothing. Now would you take it? The pill exists. It’s
called meditation.”

Ray Dalio, one of the most successful hedge fund managers in the world attributes his success to
a daily meditation regimen. When he was questioned at a New York Times19 conference in 2013,
he said the following:
"I've been doing it for 44 years, twice a day for 20 minutes. It's such a great investment ... more than any other factor in my
success. It opens up the two sides of the brain, brings a creativity and open-mindedness. It allows you to clear your head and
bring equanimity to everything."

Even Steve Jobs was an adept of meditation. In an interview with Walter Isaacson20 for his
biography, Jobs said:
“If you just sit and observe, you will see how restless your mind is. If you try to calm it, it only makes things worse, but over time
it does calm, and when it does, there’s room to hear more subtle things — that’s when your intuition starts to blossom and you
start to see things more clearly and be in the present more. Your mind just slows down, and you see a tremendous expanse in the
moment. You see so much more than you could see before. It’s a discipline; you have to practice it.”

Various scientific studies21 confirm that meditation is extraordinarily powerful. A few of its
benefits are that it reduces anxiety, decreases pain (physical and emotional), decreases
depression, and anger. On the other hand it can increase attention, focus, immune system, will-
power and overall wellbeing. It can strengthen our mind and helps us put our attention where we
want and when we want, thus, decreasing impulsivity. In trading, we all know by now what
impulsivity does to our bottom line; therefore, meditation is the best tool we can use to help us
reach a present awareness that we would otherwise not be able to reach. This present awareness
is essential because the degree to which we are able to catch ourselves before committing a
mindless trading mistake is the degree to which we’ll succeed in the markets.
If we are to trade successfully, we have to be able to pay attention to what we are thinking;
saying, doing or feeling prior to entering any trades; during the moments the trades are already
on, and finally after the trades have been exited. In other words, we have to become objective
observers to this trading process. It is so important to do that as traders as it allows us to refocus
and redirect our focus of attention on the object of our goal, thus erasing conflicting and
competing thoughts. Institutional traders have their managers to guide them and help them stay
on course; however, we – individual traders – don’t have the luxury of having such an objective
observer that would prevent us from deviating from our plan and help us stay focused in a way
that is consistent with our objectives. We have to learn how to do it ourselves, and that is where
meditation proves to be valuable.
There are many ways we can practice meditation. My practice has evolved over time to fit my
needs. The kind of meditation that I do now is called “Shikantaza” which is a Japanese
translation of a Chinese term for Zazen introduced by Rujing, a monk of the Caodong school of
Zen Buddhism. The aim of it is to just sit, that is, suspending all judgmental thinking and letting
words, ideas, images and thoughts pass by without getting involved in them. The idea is to try to
focus on what is here and now. Regardless of what you think it should be or shouldn’t be, if it
feels good or bad, your attention remains on your breath.
For beginners, here is how you start:

1. Find a quiet spot. It really doesn’t matter where you sit as long as you can sit without being
bothered for at least 15-20 minutes.
2. Sit comfortably facing a wall. The wall represents the difficulties we all face in life. Sitting
facing a wall allows us to face our difficulties. If we can cultivate equanimity while we are
facing that wall, then nothing prevents us from doing the same thing when we are faced with
difficulties in life. Also, how you position your body has a lot to do with what happens with your
mind and your breath. The most effective positioning of the body for the practice of Zazen is the
stable, symmetrical position of the seated Buddha. Sitting on the floor is recommended because
it is grounded. Use a zafu—a small pillow—to raise your behind just a little, so that the knees
can touch the ground. With your bottom on the pillow and two knees touching the ground, you
form a tripod base that is natural, grounded and stable.
3. Fold your hands in cosmic mudra. The right hand is held palm up holding the left hand which
is also held palm up, so that the knuckles of both hands overlap. If you’re right-handed, your
right hand is holding the left hand; if you’re left-handed, your left hand is holding the right hand.
The thumbs are lightly touching, thus the hands form an oval, which can rest two fingers below
the belly button. The cosmic mudra is there to help turn your attention inward.
4. Focus on your breath. As you breathe in, follow your breath in through your nostrils, then into
your throat, then into your lungs and belly. The breath is the vital force; it is the central activity
of our bodies. Mind and breath are one reality: when your mind is agitated your breath is
agitated; when you are nervous you breathe quickly and shallowly; when your mind is at rest the
breath is deep, easy and effortless.
Again, the object of this meditation exercise is to be able to make a clear distinction between the
moments where one is fully present and his/her distracting thoughts. Typically, when we find
ourselves in a distracting thought we simply acknowledge the thought, then we go back to
focusing on our breathing. As we continue to do this exercise day in and day out – as we
continue to practice – what we will find is that the amount of time that it takes for us to recognize
and acknowledge a distraction will start to collapse. As it gets smaller and smaller, there will
come a point where the distraction and the awareness of the distraction will become virtually
simultaneous. At this point, we would have become objective observers to our own stream of
thoughts. We would have trained our mind to be more present. This is particularly beneficial
when trading the markets because the first step towards changing repetitive patterns of negative
behaviors is to recognize them in real time so that we can act on them, instead of recognizing
them in hindsight.
When I first started meditating a few years ago, I remember that I was expecting something to
happen. I expected that I would sit in the lotus position and that something magical or
outstanding would happen. Looking back on this it seems ridiculous. Of course nothing really
happened. I just sat there and eventually I got bored. I remember hearing birds outside and I
thought to myself, “Maybe I could count how many birds I can hear.” Here are two things I
didn’t know back then:
1. The goal of meditation is to have no goal. Science has confirmed to us the benefits of having a
regular meditation practice, and we should keep this mind. However, we shouldn’t practice
meditation with the expectation of obtaining something from it because the moment we expect
something to happen we are instantly taken out of the experience of the present moment. But
wait a minute, isn’t the goal of having no goal a goal in and of itself? It is, so let me rephrase: the
goal is to have no goal but the goal of having no goal. I hope I didn’t lose you. Consider this
adage: “You’ll never get anywhere unless you know where you’re going.” This is common sense
but common sense is not always right. To prove this, conduct a simple experiment: go outside
and walk in a random direction. Feel free to change directions randomly. After 20 minutes,
maybe an hour, you’ll be somewhere. It’s just that you didn’t know you were going to end up
there. And there’s the rub: you have to open your mind to going places you never expected to go.
If you practice without goals, you will explore new territories. You will learn some unexpected
things about yourself and the nature of your consciousness. You will end up in surprising places.
The path – your practice – becomes the goal.
2. The quality of our meditation practice has a lot to do with what we bring into it. For example,
if you had a bad day in the markets you are going to bring that state of mind into your meditation
practice. However, the only agreement that you have to make with yourself is that if your mind
begins to wander—if you become aware that what you’re doing is thinking about your losses –
you will look at the thought, acknowledge it, and then deliberately and consciously let it go and
bring your focus back to your breath. Each time you return to the breath you are empowering
yourself with the ability to put your mind where you want it, when you want it there, for as long
as you want it there. If you find this hard to do at times, especially if you are in a crisis or
involved in something important in your life, don’t worry too much about it. It is still a
productive meditation as long as you followed your intention of returning to your breath
whenever you caught yourself getting lost in distracting thoughts. Don’t treat it as a failure; treat
it as another data point [refer to the previous chapter]. Don’t use meditation to suppress thoughts
or issues that need to come up. Instead use it to learn to accept and love everything that is inside
of you as thoughts and feelings. Let the recurring thoughts happen; engage them; let them run
their full course. But watch them; be aware of them. Allow them to do what they have to do; let
them exhaust themselves. Then release them; let them go. Come back again to the breath.
Sitting and paying attention to our breath is a practice of mindfulness. It is a way to train
ourselves to focus our attention on something specific. Out of that stillness, our whole life arises.
If you don’t get in touch with it at some time in your life, you will never get the opportunity to
come to a point of rest. Once you have practiced the discipline of seated meditation for a while,
you will start to see the repercussions in many aspects of your life. For example:
• When you engage in your everyday rituals, you will find that most of the time you are 100%
there with the tasks.
• If you are compelled to take a careless action in the markets during market hours, you will take
a moment to pay attention to your breath, and think about what you are about to do. You won’t
be judging or weighing; you would just be an observer. Soon you will notice that the impulse
would gradually dissolve like a spoon of sugar in a cup of tea.
• When you take a walk, instead of thinking about trading, profits, losses, things you need to do
later, etc., you will be more aware of your breath, your body’s sensations and the things around
you.
• When you eat, you will just eat. Your focus of attention will be on the food, on your feelings as
you eat, and on the sensations.
These are just examples. If you don’t get to this point after a few months of regular practice,
don’t give up. It is a very important part of being alive and staying alive: the ability to awaken.
Therefore, stick with it; the more you stick with it, the more you will be showing to your true self
that you are 100% committed to this. Nothing goes unseen by our unconscious mind.
THE DISREGARDED EDGES
“Every decision you make - every decision - is not a decision about what to do. It's a decision about who you are. When you see this,
when you understand it, everything changes. You begin to see life in a new way. All events, occurrences, and situations turn to opportunities to do
what you came here to do” Neale Donald Walsch

Unwavering consistency is a requirement for achieving excellence; therefore, as we saw, setting

up a strict set of rituals that allows us to manage our time efficiently is a must. This kind of
unfaltering discipline is necessary because it is important that we get the most out of our days.
Now, one of the common associations that many people make is that traders enjoy lavish nights
out on a regular – if not daily – basis. These kinds of associations are reinforced even more in the
collective mind with movies like The Wolf of Wall street, which glorifies an excessive lifestyle.
Despite the controversy surrounding the movie, searches for stockbroker jobs on Indeed.com
rose to a near 80% in the U.S around its release22. A quite similar reaction was also observed in
the 80s around the movie Wall-Street where its alluring effect inspired many would-be bankers
and traders. The movie eventually became a staple in popular culture. This has to tell us one
thing: people fantasize about the idea of easy money, easy life, with little to no efforts.
However, reality is a lot different. Trading requires hard work and dedication. Furthermore, it is
a game of inches where every little piece of an edge that can contribute to providing you with an
even greater edge in the markets shouldn’t be dismissed. It is often what makes the difference
between a winning trader and a losing trader, a profit and a loss, outstanding returns and average
returns. In addition to having a set of rituals to guide your day-to-day actions, sleep, exercise and
nutrition are as well important. These are, what I call, the disregarded edges because it seems like
everybody knows their importance in theory, but in practice few actually strive to apply what
they know.

Sleep

In order for us to gain a greater edge in the markets we have to stack the odds in our favor and
this starts with apparent simple things like having a decent amount of sleep time. This allows us
to function properly during the time that we are awake. Getting enough quality sleep reduces
stress, boosts memory, confidence, and concentration. On the other hand people who are sleep
deficient are less productive, they take longer to finish tasks, have a slower reaction time and
make more mistakes. It is just impossible to perform at a professional level without proper
sleeping habits and one would assume this to be common sense, but in actuality how many
people do have such habits?
A lack of sleep can be a major drag on happiness. For a long time, I underestimated its
importance. It wasn’t until I learned the following two things that sleep took on a whole new
level of importance for me:
• Your ability to take quick and rational decisions in the markets will drop considerably if you
don’t get enough sleep.
• If you have some destructive habits that are engrained in you and you are working on
implementing a new set of positive habits, a lack of sleep will cause your brain to go on
“autopilot.” Therefore, your brain will revert to these old negative habits because your
motivation to stick to the new positive ones will drop tremendously.
Sleep is a deep part of the body’s rhythms, and it’s one of the harder habits to change. I have
changed my sleeping patterns a number of times, and know that it can be difficult. That being
said, it is changeable. I love the idea of being like a cat. In my mind, it means sleeping
peacefully, care-free, without the worries that plague us humans and keep us from getting the
amount of rest we need to function properly [although in reality this might be a conjecture –
many cats, I’m sure, don’t always enjoy restful sleeps]. So how do we become cat-like in our
sleep? I don’t have all the answers, but here are some of the things that have worked for me:
• Physical activity. A good workout, run or yoga session usually gets me nice and tired. Even if
the activity is early in the day, I often go to bed with a tired body, and I look forward to the rest.
Don’t work out right before bed though, this will excite your body and mind.
• Getting up early. You can get your body to shift its sleeping schedule by slowly getting up
earlier. Try 15 minutes earlier than normal for a week, then another 15 minutes. If you get up
earlier, you’ll be a bit tired during the day, and when it comes time to go to sleep, you’ll enjoy
the rest.
• Establishing a bedtime ritual. It takes time to unwind the body and mind. At least an hour
before bedtime, I start slowing down. I put away things like phones, tablets, computers, etc. I lie
down and read a book (not on my laptop). This kind of ritual helps establish in my mind that it’s
time to sleep, and my body takes this cue and begins to prepare itself.
• Clearing the mind. Sometimes, we can have something spinning around in our head.
Sometimes it is replaying something that has happened, or things that someone said, and other
times it is worrying about something coming up, or planning. I usually meditate at night before
bed time to clear my mind of my day.
• No Parties. The most successful traders I know of live a very simplistic lifestyle. They have a
strict schedule that they whole-heartedly adhere to. They value their sleep time and go to bed at a
reasonable time every night because they know that a good night sleep will positively impact
their decision-making process the next day. Therefore, no time for parties! At least not on a
regular day-to-day basis. If you want to acquire even the slightest chance at competing in an
environment where evolves the smartest minds of the world and some of the most disciplined
people you’ll ever find, you have to prioritize your sleep.
I will admit that I don’t always sleep soundly. However my sleeping problems usually never last
because these steps I just outlined always prepare me for optimal sleep.

Exercise
It is no secret that exercise brings physical wellbeing that is hard to get from doing any other
activities, however, for the past decade scientists have pondered on how exercise could boost
brain function as well. Regardless of age or fitness level, studies23 show that making time for
exercise provides some serious mental benefits from the reduction of stress, the improvement in
self-confidence, to the alleviation of anxiety and the sharpening of memory. Paradoxically, those
are the main areas of our mind where we need to work on (or sharpen) if we want to be become
good traders. In the markets, we are constantly bombarded with information which causes our
emotions to fluctuate on a regular basis. I have found that running for a minimum of 20 minutes
every day has a tremendous effect on my mood and overall mental state. It helps me keep a clear
my mind while also helping me evacuate any tensions I may have accumulated from trading
losses I may have experienced in the morning. Therefore, when I come back to my trading
station, I am in a better state to take the most appropriate decisions in the moment.
As exercise, I also do Yoga which is an ancient South Asian science. In our hectic Western
world its justification is greater than ever. In general, its purpose is to provide you with a better
life through greater self-insight into your body and thoughts. Yoga postures in that sense are just
moving meditation. It is a method to connect body, mind and soul so that you reconnect with
your inner being. Since one of the purposes of yoga is to gain complete bodily control –
especially control of the breath – through a strict array of poses, it helps us sit with
uncomfortable sensations, feelings and emotions, and “forces” us to deal with them. Trading, in
the same respect, is an uncomfortable process as it requires us to take uncomfortable or counter-
intuitive decisions at times. An exercise like yoga could definitely help us develop the kind of
mental fortitude that could have a dramatic impact on our trading results.
Whichever exercise options you choose, don’t rush things; start off slowly and build up
gradually. It’s ok if you missed one day of physical activity. For example, if someone who is on
a strict diet slips and eats a good portion of pie for Thanksgiving, it is not the end of the world.
One day doesn’t make a full year. If that person keeps her consistent approach regarding her diet
then that single day won’t make any difference to her bottom line. Similarly, someone who lifts
weights and who doesn’t go to the gym for a few days in a row will not experience an instant
decrease in his muscular mass, especially if he gets to his consistent routine the following week.
What counts is that the sum of all your positive habits is greater than the sum of all your negative
ones. But always keep in mind that a regular exercise will not only have an effect on your
physique, but also your mind – they are one! In turn this will impact your ability to perform your
best while trading.

Nutrition
From a young age we are taught that eating well helps us look and feel our physical best. What
we are not always told is that, just like exercise, good nutrition significantly affects our mental
health as well24. A healthy, well-balanced diet can help us think clearly and feel more alert while
also improving concentration and attention span. Conversely, an inadequate diet can lead to
fatigue, impaired decision-making, slowed down reaction time, stress and depression. The food
we eat is often regarded as just fuel for the body. Energy is delivered to the engine (the stomach)
and the system (the body) stays running. However, as you know, the type of fuel you put in a car
will greatly affect the way it functions. Similarly, the type of food we eat and its quality also
plays a crucial role in determining our physical and mental condition. That is why processed
foods are the worst kind of food you can put into your stomach.
It is very important that you listen to your body and pay attention to how you feel in it every day.
A lot of un-comfortableness, illness and general moods can be cured by simply eating well. You
may know that French fries soaked in oil or soft drinks with sugar are fattening, but you may not
consider the fact that they also reduce your ability to concentrate, make you moody and sluggish.
However, if you eat lots of vegetables, fiber, chicken, fish, and if you drink a lot of water, you
will quickly experience the difference. You will feel more balanced, more energized, lighter,
your skin will glow and your brain will work better.
Remember, every little thing that gives you an edge in the markets shouldn’t be ignored even if it
is as simple as eating or hydrating yourself. All these little things will stack up together creating
an even greater edge. Once you are on top of your form – once your body and mind are both in
sync, only then will you be able to perform to the best of your abilities in the markets. A positive
mind + a positive expectancy model (proven trading strategy) = success!

QUESTIONS

Are you struggling with negative habits that stand between you and your trading success? How
did you acquire those habits? Do you have any positive habits? How did you acquire them? How
much would you rate your level of intention and commitment to breaking free of your negative
habits?
Have you noticed any negative patterns in your self-talk? Elaborate!
Trading is a game of inches. How do you cultivate your mental edge in the markets?

Hopefully what struck you the most in my schedule is how much time I don’t spend trading. I
think this is very important. Our ability to respond adequately to market action shifts constantly
throughout the day; therefore, I find it counter-productive to stay in front of the screen all day
watching price action. As a matter of fact, a research study published by the National Academy
of Sciences25 examined the factors that impact whether or not a judge approves a criminal for
parole. Around 1,112 judicial rulings over a 10-month period were examined. The natural
assumption to have here is that the judges were influenced by factors like the type of crime
committed or the particular laws that were broken. However, reality is surprisingly different.
The choices made by judges were impacted by all types of things that shouldn’t have an effect in
the courtroom. For example, at the beginning of the day, a judge was more likely to give a
favorable ruling about 65 percent of the time. As the morning wore on and the judge became
more and more drained, the likelihood of a criminal getting a favorable ruling dropped to zero
at a steady rate. After lunch, however, the judge would return to the courtroom refreshed and the
likelihood of a favorable ruling would immediately jump back up to 65 percent. However, as the
hours moved on, the percentage of favorable rulings would again fall back down to zero by the
end of the day. It didn’t matter what the crime was – rape, theft, murder – a criminal was much
more likely to get a favorable response if their parole hearing was scheduled in the morning (or
immediately after a food break) than if it was scheduled near the end of a long session.
This has to show us the importance of taking breaks throughout the day. Being a full-time trader
doesn’t mean that you have to stay in front of the screen all day. If you do so, you will end up
shooting yourself in the foot. Trust me on this; I have done it too many times. Nowadays, trading
the markets (placing order and exiting positions) is only a small fraction of my daily schedule. I
prepare my plan of action outside of market hours. This allows me to use active trading hours to
simply execute my plan. Such planning and time away from screens prevents me from self-
sabotaging myself. But whenever I am trading, I am fully there. I am 100% committed to the
task. My beliefs, state of mind and actions are aligned so that I am able to execute my plan to the
fullest extent of my abilities. This more balanced approach to trading has definitely changed my
whole trading experience. I approach the markets in a more relaxed way, and my results are far
more consistent.
We don’t have to read a ton of books to understand the role rituals and habits play in our lives.
When we try to change our behavior, we often strategize about our motivation and judge our
future success on the basis of our self-control. However, what we should be thinking about
instead is how to set up good rituals and habits because they persist in the midst of laziness,
tiredness and an overall lack of energy to exert self-control. They are the stepping stones on the
way to success. Once you have developed a daily set of rituals that fits your own needs, you will
find that you not only get more things done because you now remember to do them, but you also
become more efficient at what you do day after day. Furthermore, it will lay down the basis for
skill development, confidence, domain knowledge, and equanimity. Keep in mind that you will
have set-backs on your way to success and it is fine. This happens to anyone, even to the most
disciplined individuals out there. However, in the end, what counts is that the sum of all your
positive actions is greater than the sum of all your negative ones.
CHAPTER 5
PEAK PERFORMANCE: A QUESTION OF BELIEFS
"Only he who can see the invisible can do the impossible" Frank Gaines

A glass of wine is a glass of wine , no matter in what angle you stare at it. However, a
good glass of wine is specified by its flavors and taste. Similarly, a trader is a trader regardless of
his level of expertise; of what he trades; his account size, and so on, but a good trader is defined
by the equanimity he displays. He separates himself from the others by the fluidity that emanates
from each and every of his actions. Whether his methodology is discretionary or systematic in
nature, a good trader is mechanical in his process. Being mechanical doesn’t necessarily mean
engaging mindlessly in a process – quite the contrary, the good trader is present, mind and body,
in each and every of his actions. He is so immersed in the present that he flows with the markets
in such a beautiful and effortless way that it baffles the mind of the layman. This is so because he
assumes mastery over the typical woes that plague the typical trader – i.e., action or inaction,
enough and not enough, fear and greed, right and wrong, good or bad. To put it another way,
self-knowledge has some pretty amazing liberating qualities.
I like to draw similarities between good trading and free solo climbing which also requires a total
abandonment of ego, beliefs, and futile thoughts in favor of a total immersion – body and mind –
into the present moment. Alex Honnold is an American rock climber best known for his free solo
ascents of big walls. He has broken a number of records and is one of the world’s best free
soloist. On CBS’ 60 minutes, he is shown climbing the Sentinel Rock in Yosemite Natural Park.
As he moves sideways across a section of flaky and slippery granite rock he pauses to dry a
sweaty hand in his bag of chalk. There is nothing but him, the wall and the wind. All he has is a
pair of rubber climbing shoes and a bag of chalk – he climbs without ropes or a safety harness.
This is what climbers call free soloing, and it is so dangerous that less than 1% of climbers
attempt it. When Alex Honnold is asked if he gets adrenaline out of this, he replies:
“There is no adrenaline rush. If I get an adrenaline rush that means that something is going horribly wrong, you know; because
the whole thing should be pretty slow and controlled.”

Without any protection, one mistake could be fatal. Similarly, the process of trading itself should
be easy, fluid and natural. The more effortless it is, the better the chances for success. Just like in
free soloing whenever there is uneasiness, struggling, or pain, it is wrong. You are out of sync –
you are out of harmony with the markets. The perfect trade is one that requires no mental strain.
I like to push the similarities a tad further and say that a good trader is like water. Once again
Bruce Lee’s philosophy pertains well here. At the age of seventeen, martial artist and actor Bruce
Lee had been training in kung fu for four years with Yip Man a martial arts teacher and expert.
Bruce Lee, at one point, reached an impasse in his practice. When engaged in sparring he found
that his body would become tense, his mind perturbed. Such instability worked against his goal
of efficiency in combat. It is said that Yip Man sensed his trouble and approached him. "Lee," he
said, "Relax and calm your mind. Forget about yourself and follow the opponent's movements.
Let your mind, the basic reality, do the counter-movement without any interfering deliberation.
Above all, learn the art of detachment." At this, Bruce Lee understood that he should relax.
However, this raised a paradox: the effort in trying to relax was inconsistent with the
effortlessness in relaxing. In other words, trying to relax is an effort in and of itself. So in the end
he found himself back in the same situation. Again Yip Man came to Bruce and said, "Lee,
preserve yourself by following the natural bends of things and don't interfere. Remember never
to assert yourself: never be in frontal opposition to any problem, but control it by swinging with
it." After that, Bruce took a week off and spent many hours in meditation and practice, with
nothing coming of it. Finally, he decided to go sailing in a junk (boat) where he would have a
great epiphany. “On the sea”, he said, “I thought of all my past training and got mad at myself
and punched the water. Right then at that moment, a thought suddenly struck me. Wasn’t this
water the essence of Kung fu? I struck it, but it did not suffer hurt. I then tried to grasp a handful
of it but it was impossible. This water, the softest substance, could fit into any container.
Although it seemed weak, it could penetrate the hardest substance. That was it! I wanted to be
like the nature of water.” At that precise moment, Bruce Lee realized that in order to control
himself he needed to accept himself. He lay back in the boat and let it drift of its own accord. He
was at peace with himself and his environment. Bruce had not only discovered the state of no-
mindedness; he came to see his unity with everything.
The good trader is shapeless and formless just like water. You strike it and it does not suffer.
When you pour water in a cup, it becomes the cup. It flows unattached, boundless, and
adaptable. The good trader shares similar characteristics. He is also unattached to any trading
outcome; his wellbeing does not cling onto any trades. He is boundless in the sense that he
doesn’t put any limits on what he wants and on what he thinks is achievable. What his mind can
conceive he knows he can get – be it, despair, frustration, happiness, hope, successes, failures,
etc.; therefore, he works towards creating the type of life and experiences that provide him with
the greatest level of satisfaction. Lastly, he is adaptable. His expectations are in line with what
the markets can realistically make available for him. He is flexible in his assumptions and has
evolved to a point where he doesn’t take any loss personally; he views them the mere cost of
doing business.

If our trading journey doesn’t put us on a path to becoming better versions of ourselves, then I
don’t know what does. The constant uncertainty we are faced with on a moment-to-moment
basis in the markets is conducive to the exploration of better alternatives to fulfill ourselves.
These better alternatives come through an exploration of our true self. In turn this discovery of
who we are becomes the ultimate prize far beyond any monetary rewards. Getting to this point
requires three particular changes to occur in our mind. I will elaborate on them.

Embracing failure
I have failed my way to where I stand in life today. My path has been filled with mistakes,
failures, and drawdowns. To a certain degree I still experience those in my every day-to-day life;
yet, I am sitting here today, writing this chapter with a clear vision in mind. It is to hopefully
convey to you the truth about what it means to lose, to fail and to fall. All these are part of the
human experience and are as – if not, even more – important than successes. This might not be
something you are used to hearing; yet, it is noteworthy. We all evolve in a society that has a
phobia of failure. Early in life we are taught that being wrong isn’t an option, and that failure is
something to be ashamed of. As kids we soak in what comes our way just like sponges. We
naively trust that the people who play authoritative figures in our lives – teachers, parents,
relatives, etc. – know better. But they don’t always. Sooner or later what is passed on to us
(voluntarily or not) becomes part of our identity, and consequently we start dreading the very
experiences that allows us all to grow as individuals in the first place. We start taking failure as a
sign of weakness and for some this becomes the cause of numerous sufferings.
The reality is that failure and success are intricately intertwined. Since failure is a function of
trying, one of the best ways to measure your progress at something is to count the number of
setbacks and failures you have had. If you haven’t failed yet, chances are that you aren’t trying
very hard. It is no coincidence that the most successful people throughout history are also the
ones who have failed the most. Success is rarely the unrealistic straight line you see in Figure 3.
Instead it is a path filled with setbacks, mistakes and failures. It is an erratic and unregularly
spiral. Thomas Edison, who registered 1093 patents – including ones associated with the light
bulb, the phonograph, the telegraph, and cement – proudly declared that he failed his way to
success. When someone pointed out to him that he had failed ten thousand times while working
on one of his inventions, Edison responded, “I have not failed. I’ve just found ten thousand ways
that won’t work.”

Figure 3. Success is not an unrealistic straight line.

So we have to evolve and free our mind from any stigma associated with mistakes or failures.
We also have to redefine our relationship with risk so that we can perceive with the greatest
degree of objectivity the opportunities it represents, whether it’s monetary or more in terms of
self-growth. The only way to build the confidence that is required for success is by taking risks.
Each risk, whether it results in a good or bad outcome, will result in a learning experience. You
will learn what works and what doesn’t. Even risks that result in a bad outcome will build
confidence and make future risks easier as your belief in your own ability to deal with setbacks
will be reinforced when you fail over and over again. You will realize that the beast you had
always feared is not as terrifying as you might have thought it was.
People erroneously see trading success as an event. The truth is that, just like most significant
accomplishments in life, it is the sum of all the risks taken, mistakes, failures, continuous
learning and hard work one had to go through in order to get there. Success is a process where
every win and loss is a data point – it is not a standalone event. To become the person you know
you can be, you have to be willing to accept failures as learning experiences and be willing to do
more than what you think you can do. Paradoxically, in doing so, you will also experience the
greatest feelings of freedom and satisfaction in your life. So allow yourself to fail, and to lose.
You will immediately see that it wasn’t so bad after all. Nobody died; you are still there, living
and breathing, right? Hopefully, you have a roof over your head, food to eat, a good bed to sleep
on. Tomorrow is another day and the markets will hand you an equal opportunity. It has no
recollection of what happened the previous day, and the next day it could hand you the biggest
winner of your entire career, as far as I know. We all want to learn the way to win, but never to
accept theway to lose. To accept defeat – to learn to lose – is to be liberated from it. Once we
accept, we become free to flow and harmonize. Fluidity is the way to a tamed mind.

Focusing on the process

A new study26 made by some researchers at the University of Chicago and the Korea Business
School shows that if we focus too much on our goals, we risk spoiling our experience of the
activities we need to pursue to achieve said goals. In turn, that makes it far more likely that we’ll
drop out early. That is not to say that setting goals is useless. It is equally important as it fires up
our intentions to engage in the very activities that will help us achieve those goals. However,
once the intention is out there, our focus should revert to the process. When I was in the process
of writing this book, in the last 3 months prior to the release I had written approximately 40 000
words. Given the fact that I took around 11 months to get to this point, this translates to about
3600 words per month and 909 words per week. It really surprised me because I didn’t measure
my progress in relation to some benchmark. I have never set a word count goal for any particular
day. What I did focus on was writing one paragraph every Tuesday and Sunday. After sticking to
that schedule for 11 months, the result was this very book you are reading. I knew I wanted to
write a book, that was my goal and I knew that having a process would lead me there. So, I
focused on the process of doing the work, and one small step at a time it grew into something
much bigger. Had I placed my focus on the outcome and the need for immediate results, it would
have put a huge burden on my shoulders. We do this to ourselves all the time – we place
unnecessary stress on ourselves to succeed in the markets, to lose weight, to do this, to become
that. Instead, if we made it an intention to forget the goal, it would greatly reduce the amount of
pressure from having to achieve something. By focusing on the daily process and trusting that it
will lead us to our desired outcome over time, we can enjoy the present moment and improve at
the same time.
There is no destination in trading; we have to always keep learning and keep adapting to markets
which are ever changing. Therefore, focusing on the process becomes sine qua non for achieving
excellence in such an endeavor. Becoming the type of person you want to become is about the
daily process you follow and not the ultimate product you achieve because your life today is
essentially the sum of your habits. How good of a trader you are; how physically fit; how happy;
or how cultivated you are – all of those are a result of your habits. So the more we stretch beyond
our comfort zone and make an effort to do what we know we should do instead of doing what is
easy in the moment, the more we actually strengthen our cognitive ability to control our impulses
and make better choices. The more we strengthen that ability to control our impulses, the more it
becomes part of who we are.

Letting go of obsessive comparisons

One of the biggest reasons we are not content with ourselves and our lives is that we compare
ourselves to other people. We see photos of what our friends are doing on Facebook and we
think that our life isn’t exciting enough. We see someone else who has a nice job and think that
we are not doing that great in our career. We see someone with a nice physique, and we feel bad
about ours. We see people brag about how they made a killing in the markets, and we think that
we are not going anywhere in our own trading. We read about people who are traveling the
world, learning languages, going to exotic resorts and restaurants, and wonder why we are not.
We spend our time comparing our reality to an ideal, a fantasy, but it is not a comparison that
makes sense. You can’t compare apples to oranges – but that is what we do to ourselves when
we indulge in the activity of always comparing ourselves to someone else.
Our obsession with comparison stems from our dualistic outlook on life. However, duality
doesn’t exist – it is a self-created illusion. The human brain isn't divided dualistically. There is no
detached observer inside the head who is observing experience. Experience and the experiencer
are a single entity. A cup I am looking at now is not the same one that I will be looking at in the
next moment. Furthermore, each of you is also looking at it from your own angle, with your own
feelings, and these also are constantly changing. Our acquired beliefs, and our inherent
inclinations and preferences make it that we spare in comparison, categorization, weighing,
judging. In trading we compare our performance to others, and this is not only damaging to our
sense of self-worth but also to our bottom line results. We don’t all trade the same kind of
strategy; have the same kind of trading capital at our disposal; trade the same underlying and the
same markets. We don’t possess the same level of experience, emotional makeup, or even the
same kind of ability to learn. These things can be worked on, but the point I’m trying to make is
that there are little – to no – points of resemblance. So there is no valid reason to compare
ourselves to others. And even if every of those things were exactly the same, how would the
comparison be useful? It would be meaningless even then simply because if comparing yourself
to others is the only way you evaluate your worth, you will always be losing. In trading or in real
life, you will never reach a point where you are better than others in every single way possible.
So, why would you want to engage in such a losing battle? The only person we should compare
ourselves to is ourselves! Enjoy the journey. Learn about yourself as you keep trading. Keep
going, and in doing so, you’ll get better — compared to yourself. If you are doing better than
what you were doing yesterday then you are doing great, regardless of your results. Instead of
trying to be as good as or better than others, focus your energy on being the very best version of
yourself.
Next time you catch yourself using someone else as a benchmark for your own results – or worth
– stop and remind yourself how ineffective this strategy really is. Instead, compassionately
redirect your energy and attention to your own goals and what is required to achieve them.
Getting in the zone
Unleashing our true potential in the markets requires that we cultivate the ability to stay fully
focused on the present. This is the essence of “flow” or “being in the zone.” This mental state
stems from the liberation from impeding psychological occurrences. Flow is an optimal state
because it involves being totally focused on what you are doing. When in flow, nothing disturbs
or detracts from this concentrated state. Neither external nor internal distractions take up mental
space. But when the “noise” finally gets to you, you are instantly taken out of the experience.
This present-moment focus – or flow – is congruent with the way markets were designed to
make money available for us because markets cannot give us prosperity if we cannot execute our
model consistently. The easiest way I can explain this “flow” phenomenon is by taking the
example of a symbiotic relationship that you can observe everywhere in nature. The flawless
execution of our model essentially puts us in a symbiotic relationship with the markets. It can be
described as a relationship of mutual benefit or dependence. The Egyptian plover-bird, for
example, eats food remains off of the crocodile’s teeth. This benefits both parties as one gets
food and the other free dental cleaning – after a meal the crocodile opens its mouth, and in no
time a plover-bird will swing by to clean up the mess. This is not without danger for the plover-
bird. Once in a while one might get trapped between those reptilian fangs. However, the bird’s
ability to get the food out and fly away unharmed is unshakable, so much that, its actions are
easy, controlled and fluid. But, what if the plover-bird was to overthink and stress about the fact
that it might die a cruel death? It would certainly bring upon itself the very situation it fears.
Furthermore, what if it clinging onto the idea that it has to get fed right now? This could cause it
to overestimate how far it can reach into the crocodile’s mouth. Within a second or less, the
crocodile could close that huge mouth of his; the bird wouldn’t be able to make it out on time,
and our poor friend would be instantly crushed. In our quest for outstanding trading performance,
we can definitely learn a lot from this. Success is a measure of how much we are immersed into
the process of trading without overthinking. It is a measure of understanding risk to reward.
Lastly, it is a measure of our confidence in our skills. When we have those three, just like the
plover-bird we should be able to find ourselves in that magical “zone” where attention, aspects of
performance and wellbeing shoot through the roof.
CONSCIOUS COMPETENCE
“Every time we choose safety, we reinforce fear” Cheri Huber

In chapter 1 I laid out two stages of progression – unconscious incompetence and conscious
incompetence – in the ‘conscious competence’ learning theory27. Progression from the
unconscious incompetence stage to the conscious incompetence stage is often accompanied by a
feeling of realization – things 'click' into place and you feel like you have understood a key
component of the trading conundrum – which of course you have. Then comes a point where you
finally enter the stage of conscious competence. You start moving out of a place of getting things
mostly wrong into a place of getting things mostly right. When you have reached that stage,
things start to become more interesting. You are now able to perform the skills you wanted to
acquire in the first place – you are able to execute your trades without (or with minimal) trading
errors, you accept the risks inherent to any trade you place, you let your trades work without
tweaking them, and you are finally able to see this whole trading endeavor for what it truly is: a
simple act of forgetting the self! While this notion makes sense to you it is still challenging to act
in accordance with it. Being consciously competent at something means that we are able to
perform the act, but we still need to think about what we are doing; therefore, this is only
achieved by care, thought and effort.
Remember when you first learned to drive a car; at one point you were able to bring the car from
point A to point B, but this definitely required a lot of mental focus, didn’t it? You had to think
about keeping an eye on the rear-view mirror; you had to think about being very attentive to the
traffic and making sure that you didn’t go too slow, or too fast, all at that same time. You could
drive but you were far from being an expert driver. In the present days, with countless hours of
practice behind you, whenever you drive you don’t even have to think about it. It just happens
without any conscious thoughts from your part. The skills have become so engrained in you that
they are second nature. Similarly, in trading, at the conscious competence level we still have to
restrain ourselves from doing things that aren’t in our best interest. It is an uncomfortable
process. This is not to say that this is a bad place to be in – quite frankly it can be incredibly
satisfying to be at that level – however, this is where many traders will plateau. Most will slow
down or stop trying once they have reached that level of skill. That is fine if one’s goal is to
merely be good at something. However, if becoming an expert is the ultimate intention, then it is
important to keep pushing.
Traders often brag on social-medias about the number of years they have been involved in the
markets. Implied within this behavior is the conveyance of the idea that if you do your time you
will become successful. This cannot be any further from the truth. Time is only one part of the
equation. Shaping mastery is a function of deliberate practice. The difference between simple
practice and deliberate practice lies in the quality of the practice as opposed to merely the
quantity. Consider the activity of two traders practicing on a paper trading account for one hour
every day. Trader A places 2 trades during that hour, and trader B places 1. Trader B has several
tabs opened on his internet browser and his attention is split between trading, updating his
Facebook status, tweeting about what he had for lunch, watching videos on YouTube and so on.
He then takes several breaks to take calls. Trader A on the other hand is watching how price
action is enrolling. He is taking notes of any pertinent information. His attention and focus is
entirely on his trading and he has specifically asked his wife and kids not to disturb him during
that time. To characterize Trader A and Trader B’s hour of practice as equal would hardly be
accurate. Assuming this is typical of their practice ritual and they are equally skilled at the start,
who do you think would be the better trader after 6 months? Each trader in the example could
brag about practicing for one hour, but only one of them is practicing deliberately.
Researchers have noted that top performers in every industry are committed to deliberate
practice26. The best artists, musicians, athletes, CEOs, and entrepreneurs don’t merely work a lot
– they work a lot on developing specific skills. Just one hour of focus and deliberate practice
each day can deliver incredible results over the long–run instead of simply “putting in your time”
and hoping for the best. The good trader has understood this concept. He is an expert at
practicing. He is an expert at focusing on improving his technique and at constantly orienting
himself to his goals by finding ways to render his process more efficient. The lesson, then, for
expanding our skills is not to let ourselves lapse into easy, automatic action, but instead to work
at the edge of our mastery.
When we are in the process of acquiring and consolidating new skills inside our mental
environment we have to make sure that we are adopting the right behavior and that we keep
pushing, because it is so easy to let ourselves do what is easy and comfortable over what is hard
and necessary. Only when we can understand the necessity to keep stretching the boundaries of
our comfort zone can we move to the next stage – which is that of the unconscious competence
level.
UNCONSCIOUS COMPETENCE
“We are what we repeatedly do. Excellence, therefore, is not an act but a habit” Aristotle

At this point of your development, you are at one with the markets. What previously required
strong mental focus and determination is now as easy as breathing. You are able to pull out
significant money from the markets on a consistent basis. You are now a trader with a rapidly
growing account. You have a deep understanding of the dynamics of trading success and you
feel a strong connection to the markets. You equally have a great understanding of yourself –
you are coherent about what you are doing, self-accepting, self-honoring, and without internal
conflicts. You are free from being dependent or reactive in relation to market action. No need to
win, no hurt from losing. Paradoxically, money starts to take less and less importance in your
life. You are not dependent on trading to fulfill you and this frees your ability to perform at your
best in the markets. You don't get trapped in negative feelings. They don't go round in circles and
get out of control. You don’t experience racing pulse anymore. Being in such complete harmony
is a consequence of your perseverance. Harmony is self-sustaining. Harmony flows. It's a
virtuous circle that runs through all aspects of your life, body, heart, mind and spirit.
It wasn’t always like that and you still remember your humble beginnings. When you see
newbies in forums or on social-medias shouting “go market, go” as if they are urging on a horse
to win in The Grand National, you see yourself many years ago. You know what you have been
through to get where you are today and you know that a good percentage of those people won’t
be there a couple of months from now. Most would have lost all their money; most would have
quit; most would probably be scarred for life because of their inability to do the work necessary
to achieve success in such a field. Above all, by quitting they would never learn the most
important lesson that the markets tried to show them all along: their lack of adaptability caused
their own demise. When you look back at the sacrifices you have made, the list gets extended.
You have felt pain. You have cried. You even lost a couple of friends. Your family probably
tried to discourage you. You lost a boatload of money. You have doubted yourself and you
almost talked yourself out of the adventure countless times. However, you never gave up. And
when you think about it, it was all worth it! That being said, while I am one of those who
believe in hard work and dedication, I also believe in balance, rejuvenation, and the importance
of taking some time off from time to time while doing activities other than trading. Personally, I
find it important to give myself free time to explore ideas and to make sure that I continue on
excelling in my trading because I love it and not because it is an obligation. In many areas of life,
there is a magical zone of long-term growth: Pushing enough to make progress, but not so much
that it becomes unsustainable over the long term.
Cultivating balance in everything you do is essential in order to continue growing mentally.
Another fundamental aspect of sustaining growth is to understand what guides you. Life is a
whole different experience when you find purpose in life. If you are in the early part of your
trading career, you might be thinking to yourself that it is trading the markets that makes you tick
– that this is your purpose. Trust me, it is not! I am talking about a deeper purpose, one that is
built within the very nature of our being. From what I have discovered, those purposes are as
follows:
• Every day try to lessen the suffering of others by however amount. Our purpose should be
about giving, not getting. If you drop something in front of a child for example, and try to reach
it but pretend you can't, practically every child will pick it up for you and give it to you. Helping
other people is part of human nature.

• Try to learn something new every day that you did not know the previous day. The purpose of
learning is very important. We learn new things so that we can better adapt to our environment.
This is the whole purpose of our human existence, and of life itself, and while other animals may
find various original and inventive ways to adapt, the typical way we, humans, do it is through
knowledge.

• Try to make the world a slightly better place every day. If you have the power and the influence
to act on the world and contribute to making it a better place, but you don't, what kind of life is
that? The tiniest thing counts: smiling in the most sincere way to a stranger; helping someone in
need; giving to charity; eating and supporting organic and local, etc.

QUESTION

Do you accept mistakes and failures? In other words, are you compassionate towards yourself
and others? Could you be more compassionate?
Are you getting enough recovery time? Do you take enough breaks from trading?
What have your learned from this book? What are the steps you are going to implement to
change the way you experience your trading?

Paradigm Shift explored the many aspects of what makes a successful behavior in the markets. If
you read the book up to this point, you now have a pretty accurate sense of what needs to be
done in order to acquire equanimity and consistency in your habits. These two ingredients are
the foundation of any trading success. However, being aware of something doesn’t automatically
make it part of who you are. Awareness is not necessarily a belief. Learning about something
new is not the same as believing it at a level where you can act on it. Whether you do put into
application what you have learned here or not, will entirely depend on your level of desire.
We are born free – every single one of us! The bondage, restrictions, and limits that we find in
our life are self-created. The edges we perceive have been placed there by the way we use our
mind. There are fundamentally no edges and no boundaries. When you realize this, you see that
you are the author of your own destiny. Only you can set yourself free. No one can do it for you.
 SYNTHESIS

Here you will find the main ideas that I have tried to express throughout the book, condensed
into a list. Until these are anchored in your mind at a functional level, it might be a good idea to
read them on a regular basis. What I would even suggest you to do is to print/ copy, and keep
them close to your trading desk so that they are within reach whenever it is necessary.
1. Be aware of the present reality of your body. How are you feeling right now, right at this
moment? I spend so little time trading for a reason. I am aware of my body and my mind’s need
for rest. I do lots of different activities throughout the day that are unrelated to trading. When I
come back to my station I am awake, alive, clear and energized.
2. Be positive. When you pour happiness in whatever you are doing, nothing bad can happen to
you. A smile in times of stress can be very powerful. When you trade with the intimate
knowledge and confidence that nothing bad can happen to you, you become free!
3. Release yourself of your attachment. Failure to do so can only impede on your trading
performance and your overall wellbeing.
4. Process-based goals with tasks broken down into small, manageable, and consistent routines
will bring you the results you desire. This consistency will benefit every areas of your life and
bring more happiness along the way. Happiness and success is in the process which you should
be fully committed to, without thinking about short-term emotional gratification.
5. Get out of your head a little bit. What is happening inside your mind isn’t real. Fear, greed,
past, future – all is delusion. What is real is right now! Stay here, breathe and do what you have
to do with the absolute awareness of the present.
6. Whatever short-term state of mind and emotional fluctuation you may be experiencing in the
present is temporary – everything is.
7. Approach your trading from the idea that all you are doing is building skills. Just like in a
science experiment you are collecting data points and assessing the results over a minimum of 30
trades.
8. Mistakes and failures are part of your development and self-growth. They are just experiences
that point the way. You should be patient with yourself when you make mistakes and when you
experience failures. You should take full responsibility for them, embrace them, record them,
learn from them, and thrive for change.
9. Money will automatically be drawn to you as a result of trading well and consistently.
Consequently, your focus should be entirely on the process instead of the outcome or the money.
The chance to compete for something you care about; the opportunity to work hard, the time and
space to make something of value, those acts and those moments are the real prize, not the result
that comes afterward. The fight is the reward.
10. In any given moment you don’t know which trade is going to work, when, and in which
order so there is no point in overanalyzing, cherry picking, and overthinking.
11. Understand that you are only testing, pushing your limits, experiencing the losses.
Information is neutral. Our concepts of duality only exist in our mind. We are the ones
interpreting information based on our different filters – beliefs.
12. You become a successful trader when you lose your obsession about being right. Decide if
your motivation to trade is to be right, or to make money. If your choice is to be right, this is
probably not the correct arena. I see far too many people in this category within the trading
world.
13. If you are to get where your strategy can bring you, you have to focus on creating a number
of occurrences instead of focusing on creating positions. Once you change this term you realize
that there is no point in doing anything else other than entering and exiting where your system
tells you to.
14. Even when you start making consistent money, you will always have to keep learning and
adapting to the markets which are ever changing. There is no destination in trading.
15. Sitting in contemplation of your body and mind helps you focus on the process of trading
correctly. When you are focusing on the outcome or prone to making trading mistakes, it helps
shift you back to the process by developing your ability to stay focused on the present.
16. You don’t get any smarter during market hours so limit any decision making during that
time. Every decision should be made prior to market open.
17. Every time you choose not to follow your plan, you are feeding the belief you are trying to
de-energize, but if you choose to follow your plan, you are feeding the new sets of beliefs that
you want to adopt. The more you do it the easier it gets, until it becomes a learned skill.
18. Quit trying to win the lottery with your trading and instead focus on being the casino trading
against the gamblers
19. If you do not succeed in your trading endeavors it would have meant that you would have
failed to truly understand your emotional make up and master yourself.
20. You can’t guarantee the results, so don’t tie your happiness up in them. To struggle for
something meaningful, that is success — regardless of the result.
21. Don’t fear the markets. They can’t actually hurt you. You can hurt you though.
22. Trading is all about mastery: the mastery of markets’ complexities and the myriad challenges
of self-mastery. Making money is an affirmation of that mastery.
23. Most traders can write and create really good trading plans, but only the best traders actually
have the discipline to follow that plan in actual live trading.
24. Be content with what you have. Know that you are exactly where you should be in life and
don’t resent or envy others for their successes. Don’t feel sorry for yourself; instead take
responsibility for your role in life.
25. Appreciate and celebrate other people’s success in trading or in life, and don’t grow jealous
or feel cheated when you get surpassed. Success in life (whatever that might mean to you) can
come with luck or hard work. If it comes with hard work it is more durable, so be willing to work
hard for your own chance at success.
26. Allow yourself to feel the full range of human emotions. By accepting your humanity, you
will easily feel and show your emotions to yourself and to all other people. If you are angry, you
show it, and thus release it. If you are happy, you show it. If you are sad, you find it easy to weep
and thus dispel the sadness. The ability to show emotions at appropriate times is valuable, and
the mark of a mature person.
27. Don’t walk around with a feeling of entitlement. Understand that the markets – and life for
that matter – don’t owe you anything.
28. Embrace uncertainty. Understand that bad times also form part of the overall experience of
living. Cherish every single moment, good or bad, this will ultimately makes you stand apart as
an individual.
29. Luck is a double edge sword – it works both ways. Consequently, don’t rely on it or spend
time wishing or hoping for luck to manifest itself. Instead take risks and venture out of your
comfort zone. This will result in you creating your own luck.
30. It is only when you detach yourself from your thinking that you can find freedom.
 NOTES AND REFERENCES

Chapter 1

1. TalentSmart has conducted research with more than a million people, and we’ve found that 90% of top performers are skilled at managing their
emotions in times of stress in order to remain calm and in control.

2. Barber, Lee, Odean (2010): Do Day Traders Rationally Learn About Their Ability?

Odean (1998): Volume, volatility, price, and profit when all traders are above average

Barber, & Odean (2000): Trading is hazardous to your wealth: The common stock investment performance of individual investors

Kumar: Who Gambles In The Stock Market?

Barber, Odean (2001): Boys will be boys: Gender, overconfidence, and common stock investment

Calvet, L. E., Campbell, J., & Sodini P. (2009). Fight or flight? Portfolio rebalancing by individual investors.

Barber, B. M., Lee, Y., Liu, Y., & Odean, T. (2009). Just how much do individual investors lose by trading?

Gao, X., & Lin, T. (2011). Do individual investors trade stocks as gambling? Evidence from repeated natural experiments

Strahilevitz, M., Odean, T., & Barber, B. (2011). Once burned, twice shy: How naïve learning, counterfactuals, and regret affect the repurchase of
stocks previously sol.

Da, Z., Engelberg, J., & Gao, P. (2011). In search of attention

De, S., Gondhi, N. R. & Pochiraju, B. (2010). Does sign matter more than size? An investigation into the source of investor overconfidence

Chapter 2

3. Hedge Fund Market Wizzards by Jack D. Schwager – John Wiley and Sons – Larry Benedict chapter

4. Random Walk Theory: The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and
thus cannot be predicted. It is consistent with the efficient-market hypothesis. http://en.wikipedia.org/wiki/Random_walk_hypothesis

5. Predictive nature of volatility: Mandelbrot’s analysis of historical data indicates that returns have sample distributions that are highly leptokurtic,
meaning they have fat tails that make extreme market moves more likely than would be predicted by the normal distribution.
http://web.williams.edu/Mathematics/sjmiller/public_html/341/handouts/Fama_MandelbroitAndStableParetianHypothesis.pdf

6. P.53. Black Swan event: The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a
major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. Term popularized by Nassim Taleb, The Black
Swan: The Impact of the Highly Improbable - April 17, 2007. Random House

Chapter 3

7. Paper from the scientific American - Self-control helps you meet small challenges, but to change your life significantly you'll need self-regulation
instead: http://www.scientificamerican.com/article/taking-the-reins/?page=2

8. Trade like A Casino by Richard Weissman – John Wiley and Sons

9. The definitive guide to position sizing: How to evaluate your system and use position sizing to meet your objectives by Dr. Van K. Tharp - The
International institute of trading mastery

10. Trading in the Zone and The Disciplined Trader by Mark Douglas – New York Institute of Finances

11. “This too shall pass” is an adage indicating that all material conditions, positive or negative, are temporary. The phrase seems to have originated
in the writings of the medieval Persian Sufi poets, and is often attached to a fable of a great king who is humbled by the simple words. Some versions
of the fable, beginning with that of Attar of Nishapur, add the detail that the phrase is inscribed on a ring, which has the ability to make the happy
man sad and the sad man happy. Jewish folklore often describes Solomon as giving or receiving the phrase. The adage and associated fable were
popular in the first half of the 19th century, appearing in a collection of tales by the English poet Edward Fitzgerald and being employed in a speech
by Abraham Lincoln before he became president.

12. What are the chances of your coming into being? by Dr. Ali binazir: http://blogs.law.harvard.edu/abinazir/2011/06/15/what-are-chances-you-
would-be-born/

13. Can money buy happiness? Research by Stanford Graduate school of business: http://www.gsb.stanford.edu/insights/research-can-money-buy-
happiness

14. When thoughts become actions: An fMRI paradigm to study volitional brain activity in non-communicative brain injured patients:
http://www.ncbi.nlm.nih.gov/pubmed/17509898

Chapter 4

15. 1/ Benefits of self-affirmation: http://www.cmu.edu/homepage/health/2013/summer/benefits-of-self-affirmation.shtml 2/ Carnegie Mellon

Research Shows Self-Affirmation Improves Problem-Solving Under Stress
http://www.cmu.edu/news/stories/archives/2013/may/may3_selfaffirmation.html 3/ The Psychology of Change: Self-Affirmation and Social
Psychological Intervention https://ed.stanford.edu/sites/default/files/annurev-psych-psychology_of_change_final_e2.pdf 4/ Self-Affirmation
Improves Problem-Solving under Stress: http://www.plosone.org/article/info:doi/10.1371/journal.pone.0062593

16.True self: True self and false self are concepts introduced into psychoanalysis in 1960 by D. W. Winnicott. Winnicott used "True Self" to describe
a sense of self based on spontaneous authentic experi-ence, and a feeling of being alive, having a "real self." "False Self" by contrast Winnicott saw
as a defensive facade — one which in extreme cases could leave its holders lacking spontaneity and feeling dead and empty, behind a mere
appearance of being real.

17. The cognitive scientist Bruce Hood defines an illusion as an experience of something that is not what it seems. He uses this definition in his book,
The Self Illusion: How The Social Brain Creates Identity (2012), arguing that the self is an illusion – and he admits that everyone experiences a sense
of self – a feeling that we have an identity, and that this identity does our thinking and perceiving – but he says that beyond the experience, there is
nothing we can identify as the self. This is an argument conveyed by Sam Harris as well. Harris is an American author, philosopher, neuroscientist,
and the co-founder and chief executive of Project Reason, a non-profit that promotes science and secularism. He has discussed a lot about the nature
of the self and how spirituality and science can intertwine. This is in line with Buddhism teachings. In early Buddhist texts the Buddha uses the term
anatta, which means ‘not-self’ or the ‘illusion of the self’. Thus Buddhism contrasts to, for example, Cartesianism, which says that there is a
conscious entity behind all of our thoughts. The Buddha taught his followers that things are perceived by the senses, but not by an ‘I’ or ‘me’. Things
such as material wealth cannot belong to me if there is no ‘me’, therefore we should not cling to them or crave them.

18. The Happiness Hypothesis by Jonathan Haidt published by Basic Books

19. Ray Dalio talks about his meditation practice: http://www.dailyfinance.com/2013/11/12/ray-dalio-hedge-fund-genius-meditation-secret-success/

20.Steve Jobs and meditation: http://www.businessinsider.com/steve-jobs-zen-meditation-buddhism-2015-1

21.1/ Using meditation for less stress and better wellbeing: http://www.racgp.org.au/download/Documents/AFP/2009/June/200906manocha.pdf 2/
Meditation acutely improves psychomotor vigilance: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2919439/ 3/ Alterations in brain and immune
function produced by mindfulness meditation: http://www.ncbi.nlm.nih.gov/pubmed/12883106 4/ Physiological effects of transcendental meditation:
http://www.sciencemag.org/content/167/3926/1751

22. Job searches for ‘stockbroker’ skyrocket after ‘The Wolf of Wall Street: http://blogs.marketwatch.com/thetell/2014/03/27/job-searches-for-
stockbroker-rocket-after-the-wolf-of-wall-street/

23. 1/ Mental health and physical activity: http://www.sciencedirect.com/science/journal/17552966 2/

http://www.apa.org/monitor/2011/12/exercise.aspx

24. 1/ The role of nutrition in mental health: http://www.mindingourbodies.ca/about_the_project/literature_reviews/depression_and_nutrition 2/

http://www.sciencedaily.com/releases/2015/01/150129104217.htm 3/ http://www.sciencedirect.com/science/article/pii/S095528631300020X

25. Scientific paper showing how extraneous factors affect judicial decisions: http://www.pnas.org/content/108/17/6889.full.pdf

Chapter 5

26. When thinking about goals undermines goal pursuit – scientific paper by University of Chicago and the Korea Business School:

http://www.sciencedirect.com/science/article/pii/S0749597812000222

27.In psychology, the four stages of competence, or the "conscious competence" learning model, relates to the psychological states involved in the
process of progressing from incompetence to competence in a skill:
Unconscious incompetence

The individual does not understand or know how to do something and does not necessarily recognize the deficit. They may deny the usefulness of the
skill. The individual must recognize their own incompetence, and the value of the new skill, before moving on to the next stage. The length of time
an individual spends in this stage depends on the strength of the stimulus to learn.

Conscious incompetence

Though the individual does not understand or know how to do something, he or she does recognize the deficit, as well as the value of a new skill in
addressing the deficit. The making of mistakes can be integral to the learning process at this stage.

Conscious competence

The individual understands or knows how to do something. However, demonstrating the skill or knowledge requires concentration. It may be broken
down into steps, and there is heavy conscious involvement in executing the new skill.

Unconscious competence

The individual has had so much practice with a skill that it has become "second nature" and can be performed easily. As a result, the skill can be
performed while executing another task. The individual may be able to teach it to others, depending upon how and when it was learned
Thanks for reading; I hope you enjoyed the book as much as I enjoyed writing it
 ABOUT THE AUTHOR

Yvan Byeajee is a full-time trader, writer, mentor, and coach. He spends most of his time
travelling back and forth between North America, Europe and the tiny island nation called
Mauritius where he is originally from. He does this while trading the U.S stock market and
dispensing coaching and mentoring sessions wherever needed.
Find out more at http://www.amazon.com/Yvanbyeajee
Or visit http://www.tradingcomposure.com
 ACKNOWLEDGEMENTS

I would like to thank all the actors who played a contributing role in my life, from family and
friends, to acquaintances or random strangers with whom I have exchanged thoughts and
sometimes a few laughs. All of them taught me valuable lessons about life and played an
immense role in shaping the person I am today.

Special thanks:
• Dr. Brett Steenbarger, for his amazing work at Traderfeed.blogspot.ca. His consistency
in releasing weekly blog posts fueled my inspiration, and helped keep me focused on the process
of writing this book when at times I felt like giving up or delaying the work. Dr. Steenbarger is a
renowned Trading Psychologist, Trading Expert and best-selling Author. He wrote classics such
as, The psychology of trading, The Daily Trading Coach, Enhancing Trader Performance among
others. I am featured in his new book called Trading Psychology 2.0, where I share a list of my
best trading practices.
• Dr. Alexander Elder, Author of the classic Trading for a living for his precious
feedback on where to steer the book.
• Laetitia Thanee Chantal Jacquouton, Yoga Instructor, and Jaap Verbaas, PhD in
Geology, for helping with the edition of the book during their free time. Please, keep in mind that
while having done a great job with the editing, they are not professional editors. They have
accepted to do the work free of charge so that I could pass on the savings to you by making this
book more affordable. So, there still might remain some mild grammatical errors, however, this
doesn’t diminish in any way the quality of the book’s content.
• Kevin Guy Harry Jacquouton for showing me that forgiveness and redemption are
possible.
 CAN I ASK A FAVOUR?
If you enjoyed this book, found it useful or otherwise then I’d really appreciate it if you would
post a short review on Amazon. I do read all the reviews personally so that I can continually
write what people are wanting.
If you’d like to leave a review then please visit the link below:
http://www.amazon.com/Paradigm-Shift-cultivate-equanimity-uncertainty-
ebook/dp/B00LRYXMTO/ref=sr_1_1?ie=UTF8&qid=1429890199&sr=8-
1&keywords=paradigm+shift+yvan+byeajee

Thanks for your support and I wish you the best in your trading endeavors!